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| Home - Software M&A Review - Mar 03 Issue |
Software M&A – First Quarter 2003, Deals and Insight
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MASBC Acquisition Corp. acquires Viador (Nasdaq: VIAD)
Category: Enterprise information portal
Purchase Price: $1,080,000EV
Seller Revenue: $4,940,000
Revenue Multiple: 0.22x
Payment Terms: Cash
SEG’s Perspective:
Following in the footsteps of Industri-Matematik, Prophet 21 and Riverdeep, Viador, an enterprise portal vendor, takes its business private. MASBC, the acquisition corporation formed to purchase Viador, is financially backed by Suma Ventures and an existing Viador shareholder. Like the others, Viador lists cost savings, better management focus and a desire to reduce executive liability imposed by the Sarbanes-Oxley Act as primary drivers. Viador raised $36M in a 1999 IPO, but saw its revenue decline precipitously from $26.2M in 2000 to its current run rate of $4.9M. Viador had approximately $1.4M of cash on its books and a market cap of $168K.
Open Text Corp. (Nasdaq: OTEX) acquires Corechange
Category: Enterprise information portal
Purchase Price: $4,200,000
Seller Revenue: $18,000,000 estimate
Revenue Multiple: 0.23x
Payment Terms: Cash
SEG’s Perspective:
Knowledge management software provider Open Text follows up its recent acquisition of Eloquent by acquiring enterprise portal vendor Corechange. Open Text, hoping to beef up the front and back ends of its collaboration offering, will pay 0.2 times Corechange’s fiscal 2001 revenue, a multiple which clearly reflects the tough market environment for portal-only vendors. It’s likely Corechange was running out of cash. Another disappointment for VCs, who had $36M invested.
Open Text Corp. (Nasdaq: OTEX) acquires Eloquent Corp. (Nasdaq: ELOQ)
Category: CRM rich media solutions
Purchase Price: $6,720,000
Seller Revenue: $2,500,000
Revenue Multiple: 2.69x
Payment Terms: Cash
SEG’s Perspective:
Open Text, a leader in online collaboration, plans to acquire Eloquent, a niche CRM player whose technology will add video conferencing to Open Text’s Livelink offering. Eloquent, with sharply declining revenue, a negative $12.2M twelve month EBITDA and $12.1M cash balance has been buyer shopping for 6 months. Open Text’s offer of 34 cents per share ($6.7M all cash) is quite a come down. Eloquent traded as high as $39 per share in March, 2000. How times change.
Perot Systems (NYSE: PER) acquires Soza & Company
Category: Government IT provider
Purchase Price: $75,000,000
Seller Revenue: $137,000,000
Revenue Multiple: 0.55x
Payment Terms: Cash and earnout
SEG’s Perspective:
In the IT services arena, Perot Systems acquires Soza & Co. a professional services firm strongly focused on defense and homeland security, growth sectors which are clear priorities for Perot. Soza expands Perot’s Government Services Group, adding 900 employees and $137M in revenue to the Perot Group’s 600 employees and $63M of revenue. With an earnout in cash and stock of $32M, the purchase price can approach a 0.8x revenue multiple, not bad for a services provider.
SunGard Data Systems (NYSE: SDS) acquires Caminus Corp. (Nasdaq: CAMZ)
Category: Integrated software solutions for the energy sector
Purchase Price: $119,000,000EV
Seller Revenue: $84,000,000
Revenue Multiple: 1.42x
Payment Terms: Cash
SEG’s Perspective:
Sungard, the leader in financial services software, moves aggressively into the energy vertical, acquiring Caminus, a developer of trading and risk-management systems for that sector. Sungard’s value has declined 9.1% since its $9 a share offer, a $6.50 premium over Caminus’ trading price. We disagree. Backing out Caminus’ estimated $40M cash balance, Sungard paid only 1.4x trailing 12 month revenue for a company growing at almost 50% annually. Caminus’ net losses are largely due to amortization expenses relating to prior acquisitions.
SunGard Data Systems (NYSE: SDS) acquires HTE (Nasdaq: HTEI)
Category: Software and services for the public sector
Purchase Price: $96,900,000EV
Seller Revenue: $70,000,000
Revenue Multiple: 1.38x
Payment Terms: Cash
SEG’s Perspective:
SunGard continues to ramp up its public services operating unit with the acquisition of HTE, a leader in IT and software solutions to the government sector, especially local agencies. Backing out HTE’s cash balance of $24.1M, SunGard pays a 1.4x multiple, or $96.9M. Although HTE’s revenue has hovered for the past two years around $65M, it returned to profitability in 2002, attracting SunGard’s interest.
EV: Enterprise Value = equity purchase price, plus seller’s interest bearing debt, minus seller’s cash & cash equivalents
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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