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| Home - Software M&A Review - Oct 03 Issue |
Software M&A - Q3 Review
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| Buyer |
Seller |
Price |
Revenue |
Multiple |
Currency |
| Interwoven (Nasdaq:IWVN) |
iManage (Nasdaq:IMAN) |
$135,918,000 EV |
$42,700,000 |
3.2x |
Cash / stock |
| SEG’s Insight: After six months of partnering, Web content management leader Interwoven acquires iManage, a provider of content collaboration and document management solutions. Interwoven can now tout an end-to-end knowledge management suite to better compete against Documentum. iManage shareholders receive a 23.6% premium, but only about 18% in cash and the balance in stock. Could be risky. Interwoven lost $14.6 million on flat revenue of $52 million in 1H03. Its $2.40 market price fell on the announcement, but rebounded to $2.85. |
| Buyer |
Seller |
Price |
Revenue |
Multiple |
Currency |
| Intuit (Nasdaq:INTU) |
Income Dynamics |
$10,000,000 |
$3,500,000 (estimate) |
2.9x |
Stock |
| SEG’s Insight: Financial software behemoth Intuit reenters the acquisition fray, this time buying Income Dynamics, a maker of taxpayer tools that will strengthen market-leading TurboTax by giving it the power to easily estimate the value of items donated to charities. This is Intuit’s first acquisition since it bought IT resource and tracking firm Blue Ocean Software for $170 million in August 2002. Income Dynamics revenues are estimated to be $3.5 million. |
| Buyer |
Seller |
Price |
Revenue |
Multiple |
Currency |
| Intuit (Nasdaq:INTU) |
Innovative Merchant Solutions |
$116,000,000 |
$25,000,000 |
4.6x |
Cash |
| SEG’s Insight: Intuit’s buying spree continues, driven by its “beyond accounting” growth strategy. The latest addition is Innovative Merchant Solutions, a provider of merchant account services to small businesses. Intuit, which already has a modest merchant services operation, gains access to 85,000 IMS merchants and a much stronger presence in the highly profitable bankcard processor sector. Note the all cash purchase price has contingencies, most likely an earnout. |
| Buyer |
Seller |
Price |
Revenue |
Multiple |
Currency |
| Plato Learning (Nasdaq:TUTR) |
Lightspan (Nasdaq:LSPND) |
$32,970,000 EV |
$50,000,000 |
0.7x |
Stock |
| SEG’s Insight: After racking up substantial losses, ($33.5 million on $50 million revenue in fiscal year ’03) and with only enough cash to fund two more quarters, education software vendor Lightspan sells to Plato Learning, a financially challenged provider of e-courseware to community colleges. Plato, which lost $5.7 million of operating income on $78 million in revenue during the last twelve months, hopes to beef up its presence in Lightspan’s K-12 market. |
| Buyer |
Seller |
Price |
Revenue |
Multiple |
Currency |
| SCO Group (Nasdaq:SCOX) |
Vultus |
$2,700,000 |
$1,250,000 (estimate) |
2.2x |
Stock |
| SEG’s Insight: SCO Group, a provider of tools and services for Linux developers that has seen its stock price rocket upward six fold since filing a $1billion IP infringement suit against IBM, appears to be taking advantage of its new found wealth, with its all stock asset purchase of Vultus Technology, a developer of tools used to design Web app interfaces. This is the first of what SCO identifies as a string of $4 to $10 million strategic acquisitions. Sellers beware. |
| Buyer |
Seller |
Price |
Revenue |
Multiple |
Currency |
| Secure Computing (Nasdaq:SCUR) |
N2H2 (NTWO.OB) |
$15,813,000 EV |
$11,100,000 |
1.4x |
Stock |
| SEG’s Insight: Network security provider Secure Computing acquires content-filtering competitor N2H2, seeking to boost its number-three position in content filtering. Secure also picks up 2, 000 new customers. Secure paid 1.4 times TTM revenue after factoring in N2H2’s cash and debt. The deal gives N2H2’s shareholders a 38% return based on a five-day preceding average, not bad considering the quarter ended June 2003 was the first time N2H2 recorded a profit…of $48,000. |
| Buyer |
Seller |
Price |
Revenue |
Multiple |
Currency |
| SSA Global Technologies |
EXE Technologies (Nasdaq:EXEE) |
$16,026,000 EV |
$73,656,000 |
0.2x |
Cash |
| SEG’s Insight: Enterprise software provider SSA Global Technologies nabs struggling EXE, the latest in its series of acquisitions. EXE’s highly regarded warehouse management/supply chain execution software will extend SSA’s ERP offerings to the mid-market. While EXE’s revenues have been flat, it reigned in expenses to near breakeven and had $32 million in cash, making the .22x purchase price appear curiously low. SSA, which earlier acquired Baan, Infinium and interBiz, has a record of picking up deals on the cheap. |
| Buyer |
Seller |
Price |
Revenue |
Multiple |
Currency |
| Stellent (Nasdaq:STEL) |
Ancept |
$2,770,000 |
$4,500,000 (estimate) |
0.6x |
Cash / stock |
| SEG’s Insight: The content management sector consolidated further as Stellent picked up small, privately-held digital asset management vendor Ancept, an IBM partner. After Stellent competitors Documentum and Interwoven recently acquired digital asset management developers (Bulldog and MediaBin), Stellent had little choice but to embed the technology in its offering. Ancept shareholders receive $2 million in cash and 100,000 shares of Stellent stock. |
| Buyer |
Seller |
Price |
Revenue |
Multiple |
Currency |
| The Sage Group (Nyse:HEW) |
Timberline Software (Nasdaq:TMBS) |
$91,850,000 EV |
$63,100,000 |
1.5x |
Cash |
| SEG’s Insight: The Sage Group follows through on its promise to add vertical business tools for the midmarket with its acquisition of Timberline. Looks like Sage may be mimicking the vertical acquisition strategy Intuit began nearly two years ago. Sage paid Timberline shareholders a 33% premium to get the company’s integrated operations/financial tools for medium-sized construction and real estate outfits. The buy gives U.K-based Sage and U.S. subsidiary Best Software a shot at holding onto its current customers as they outgrow the pair’s entry-level offerings. |
EV: Enterprise value = Purchase price, plus debt, minus 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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