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| Home - Software M&A Review - Nov 04 Issue |
Software M&A - Insights
continued... page 3 |
| Buyer |
Seller |
Price |
Revenue |
Mult. |
Currency |
| QUADRAMED(OTCBB: QMDC.OB) |
Tempus Software |
$13,220,590 |
$3,400,000 |
3.9x |
Stock, Cash |
| Category: HealthCare Software |
SEG's Insight:
QuadraMed, a healthcare information technology provider, acquires Tempus Software, a privately held developer of patient access and enterprise scheduling solutions for the healthcare industry. With Tempus, QuadraMed seeks to beef up its Hospital Information Systems offering and gain access to 350 healthcare facilities in the U.S. and Canada. Although QuadraMed lost almost $7 million on revenue of $132 million (ttm) and has posted a year-end profit only twice in the last 10 years, Tempus shareholders agreed to take $5.8 million in cash and 2,558,824 shares of QuadraMed common stock. Earlier in June, QuadraMed raised $94 million in a private placement to pay down debt. |
| Buyer |
Seller |
Price |
Revenue |
Mult. |
Currency |
| Symantec (NASDAQ: SYMC) | TurnTide | $28,000,000 |
$1,700,000(Estimate) |
16.5x |
Cash |
| Category: Anti-Spam |
SEG's Insight:
Enterprise security software provider Symantec acquires TurnTide, a startup anti-spam software developer. The deal comes less than two months after Symantec paid $370 million for anti-spam solution provider Brightmail. Symantec touts the two acquisitions as complementary, with TurnTide's technology installed on network routers to slow down a spam sender's system, and Brightmail installed on the messaging network. The enterprise anti-spam market is expected to reach $979 million this year. TurnTide began business 5 months before the acquisition with $1 million in funding from founder Josh Kopelman, whose previous company Half.com was acquired by eBay for $241 million only 6 months after its website went live. |
| Buyer |
Seller |
Price |
Revenue |
Mult. |
Currency |
| TEKELEC(NASDAQ: TKLC) |
Steleus Group |
$56,000,000 |
$25,000,000 |
2.2x |
Stock, Cash |
| Category: Network Performance Management Software |
SEG's Insight:
Tekelec, provider of telecommunications products for next-generation fixed, mobile, and packet networks, acquires Steleus Group, a real-time performance monitoring company that supplies network-related intelligence to telecom operators. After a two year strategic partnership, Steleus will now form the cornerstone of Tekelec's new Communications Software Solutions business unit. With almost 90% of its revenue coming from North America, Tekelec found Steleus" footprint outside of the U.S. (100 operators in 35 countries) particularly attractive. Aggressively seeking growth through acquisitions, Tekelec made two investments in network switching equipment makers by buying a 52% controlling interest in Santera ($28 million) and completing its acquisition of Taqua ($86 million) in April. |
| Buyer |
Seller |
Price |
Revenue |
Mult. |
Currency |
| Total System Services (NYSE: TSS) |
Clarity Payment Solutions |
$53,000,000 |
$9,800,000(Estimate) |
5.4x |
Cash |
| Category: Transaction Processing |
SEG's Insight:
Total Systems Services (TSYS), a $1 billion global electronic payment processing company, acquires Clarity Payment Solutions, provider of reporting, marketing, communications, compliance and risk management tools designed for the prepaid market. Clarity, now one of 9 TSYS subsidiaries, will allow TSYS to expand out of its mature current market (consumer, debit, commercial, and retail cards) into emerging prepaid markets like healthcare, payroll, insurance claims, branded gift and the like. Look for more acquisitions from TSYS as it tries to branch out into emerging foreign markets (domestic sales accounted for 92% of total revenue) and grow rapidly in a consolidating industry. In April, TSYS" largest competitor, First Data, acquired Concord EFS for $7 billion. |
| Buyer |
Seller |
Price |
Revenue |
Mult. |
Currency |
| Veritas (NYSE: VRTS) |
KVault Software |
$225,000,000 |
$23,000,000 |
9.8x |
Cash |
| Category: E-mail Content Management |
SEG's Insight:
Veritas acquires KVault Software, an England based developer of e-mail content archiving. The e-mail archiving market has seen 57% CAGR over the next 5 years1, in large part due to Sarbanes-Oxley. Veritas paid an estimated 10 times trailing earnings to acquire a best-of-breed offering after an attempt to build its own e-mail storage product failed last year. An estimated 23% of KVault's 2003 revenue came from Veritas competitor EMC, which now offers a complementary archiving product through recently acquired Legato. Veritas hoped the acquisition would generate excitement after missing 2Q04 financial projections and a 30% reduction in its market cap, but Veritas" share price fell 4% on news of the deal because of concerns it overpaid. |
1: Gartner Research
| Buyer |
Seller |
Price |
Revenue
| Mult. |
Currency |
| VERTICALNET(NASDAQ: VERT) |
B2eMarkets |
$12,963,603 |
$8,100,000 |
1.6x |
Stock |
| Category: Supply Chain Management and Logistics |
SEG's Insight:
VerticalNet, a former dotcom darling and operator of online vertical trade communities that is now a provider of strategic sourcing and supply chain software, acquires strategic sourcing software maker, B2eMarkets (B2e). B2e complements VerticalNet's previous 2004 acquisition of Tigris, a decision support optimization provider, and will bring with it sorely needed new customers. VerticalNet, with new licenses accounting for only 3% of total revenue and four customers responsible for 72% of total revenue over the last 6 months, convinced B2e to take its stock and a promissory note as payment. The united company will be competing against the recently combined Ariba/FreeMarkets, larger ERP software developers, and niche players in spend analytics, sourcing, and optimization. In an attempt to clean up its balance sheet and return to profitability, VerticalNet recently raised $3 million in a private placement. VerticalNet's $32 million market cap is a far cry from its 1999 IPO market cap of $738 million. |
| Buyer
| Seller |
Price |
Revenue |
Mult. |
Currency |
| ViryaNet(NASDAQ: VRYA) |
Utility Partners |
$5,200,000 |
$5,600,000(Estimate) |
0.9x |
Cash, Stock |
| Category: Human Resource & Workforce Management |
SEG's Insight:
ViryaNet, a developer of internet based software for managing service operations through browsers, wireless devices, laptops, and PCs, acquires Utility Partners (UP), a mobile workforce management solution provider for the utilities vertical. The acquisition eliminates a competitor in the utilities sector where ViryaNet has focused. ViryaNet, which hasn't had a profitable fiscal year since 1996 and currently posts a $13.3 million market cap, financed the acquisition with 52% stock and the balance in cash. ViryaNet, whose TTM revenue is $13.4 million, will get a significant boost from UP's approximately $5.6 million in revenue. The deal coincided with an announcement by one of ViryaNet's competitors, MDSI, which terminated its acquisition of mobile resource management provider @Road. |
| Buyer |
Seller |
Price |
Revenue |
Mult. |
Currency |
| WebMD(NASDAQ: HLTH) |
ViPS |
$160,000,000 |
$58,300,000 |
2.7x |
Cash |
| Category: Health Care Software |
SEG's Insight:
Continuing an acquisition spree of 22 companies in 2002 and 12 companies in 2003, WebMD acquires ViPS, a provider of decision support, claims processing and fraud prevention solutions to the Government, Blue Cross - Blue Shield plans and commercial health payers. In addition to providing ready access to these key target markets, ViPS will add some $17 million to WebMD's bottom line. The $160 million purchase price includes certain assumed liabilities and will be paid in cash. Once a subsidiary of First Data, ViPS was taken private by investment firm Cornerstone Equity Investors in 1998 for $48 million with revenue of approximately $24.5 million. |
| Buyer |
Seller |
Price |
Revenue |
Mult. |
Currency |
| WorkStream(NASDAQ: WSTM) |
Bravanta |
$5,600,000 |
$5,600,000(Estimate) |
1.0x |
Stock |
| Category: Incentive Management |
SEG's Insight:
Workstream, a provider of hosted workforce management solutions, acquires another incentive management software company. This time it's Bravanta, a San Francisco startup which has raised over $46 million from large VCs. The deal comes two months after Workstream's acquisition of compensation management solution provider Kadiri, and is WorkStream's third buy this year. WorkStream's strategy is to grow through acquisition and seek a buyer when consolidated revenue reaches $35 million to $40 million. With Bravanto, WorkStream expects to add 300 blue chip customers and $9 million in revenue (a significant boost to its FY2003 $18 million total). With $10 million recently raised in a private placement earmarked for growth, look for more acquisitions from Workstream. |
This report was prepared by Software Equity Group, L.L.C. (SEG), a mergers and acquisitions advisory firm serving the software, life science and technology sectors. SEG is solely responsible for its content. This material is based on data obtained from sources we deem to be reliable; it is not guaranteed as to its accuracy and does not purport to be complete. This information is not to be used as the primary basis of investment decisions. For more, please visit www.softwareequity.com, or phone (858) 509-2800
 
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