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| Home - Software M&A Review - Mar 04 Issue |
Software M&A – A Glimpse into the First Quarter
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Intellisync (Nasdaq: SYNC) acquires Search Software America
Category: Data Management
Purchase Price: $20,000,000
Seller Revenue: $10,000,000
Revenue Multiple: 2.0x
Payment Terms: Cash
SEG’s Perspective:
Intellisync Corporation, a leading provider of synchronization and mobilization software, acquires Search Software America (SSA) whose products synchronize personal identity data within computer systems and network databases. SSA’s ability to match, group, and manage differently spelled names and addresses will leverage Intellisync in SSA’s key markets, including financial services and state/local government. SSA’s $3.5 million EBITDA and $10 million in revenue during calender year 2003 will be a welcome addition to Intellisync’s negative $8.5 million EBITDA and $32 million TTM revenue. Over the last twelve months, Intellisync has acquired five companies with the intention of shifting the company’s focus from cabled PDAs to wireless handhelds, smartphones, laptops, and tablets.
Verity (Nasdaq: VRTY) acquires Cardiff Software
Category: Document/Forms Management
Purchase Price: $50,000,000EV
Seller Revenue: $26,300,000
Revenue Multiple: 1.9x
Payment Terms: Cash
SEG’s Perspective:
Verity, a provider of enterprise search, classification and personalization software, acquires Cardiff Software, a developer of document-capture and e-forms processing software. The deal, which takes the last independent e-forms software developer off the market for $50 million all cash, extends Verity into a new area of information management. Verity will now be able to capture data from documents and forms and move the unstructured information through business processes, which then can be searched and analyzed by Verity’s suite of tools. With Cardiff competitors (Accellio, Shana, and Caere) in the e-forms space all being acquired by larger companies, and with Microsoft and Adobe systems elbowing their way into the space, the time was right for Cardiff to exit.
Hewlett Packard (NYSE: HPQ) acquires Novadigm, Inc.
Category: Enterprise System Management
Purchase Price: $94,834,000EV
Seller Revenue: $58,300,000
Revenue Multiple: 1.6x
Payment Terms: Cash
SEG’s Perspective:
Hewlett-Packard Co. continues to aggressively expand its OpenView software suite by acquiring Novadigm Inc., a leading provider of automated IT configuration and change management software. Simultaneously, HP picked up Consera Software, a provider of software that enables IT resources to be mapped to business services. Last fall, HP acquired Talking Blocks for services management, Baltimore Technologies’ Select Access business for identity management, and Persist Technologies for information lifecycle management. Novadigm saw its revenue decrease 11% the last fiscal year. HP agreed to pay $6.10 in cash for each share of Novadigm stock. The day after this deal was announced, Novadigm’s stock shot up 27% shortly after the opening bell.
Captiva Software (Nasdaq: CPTV) acquires ADP Context (Division of ADP)
Category: Healthcare
Purchase Price: $5,200,000
Seller Revenue: $3,500,000 (Estimate)
Revenue Multiple: 1.5x
Payment Terms: Cash
SEG’s Perspective:
Captiva Software Corporation, a provider of input management software, acquires ADP Context Inc., a healthcare business unit of ADP. ADP Context develops automated medical claims coding, processing and reimbursement software. With ADP Context, Captiva extends its presence in both the payer and provider sides of the healthcare market. ADP Context gives Captiva 1,400 physician practices, hospitals, insurance carriers, administrators, and managed care organizations.
VerticalNet (Nasdaq: VERT) acquires Tigris Corp.
Category: Supply Chain Management
Purchase Price: $9,279,690
Seller Revenue: $10,000,000
Revenue Multiple: 0.93x
Payment Terms: Cash, Stock
SEG’s Perspective:
Verticalnet, a strategic sourcing and supply chain application vendor, acquires Tigris Corp., a sourcing and supply chain consultancy. Most appealing to VerticalNet was Tigris’s data intensive, tools-based approach to spend analysis, which Aberdeen Group claims could save enterprises $260 billion annually. The acquisition, which will double VerticalNet’s TTM revenue comes none too soon. VerticalNet’s revenue declined 65% to $9.6 million in its last fiscal year. With only $4.2 million in cash on hand, the company resorted to a net $6.2 million private placement less then two weeks before this deal was announced.
Agilysys (Nasdaq: AGYS) acquires Inter-American Data
Category: Hospitality Management
Purchase Price: $36,500,000
Seller Revenue: $40,000,000 (Estimate)
Revenue Multiple: 0.91x
Payment Terms: Cash
SEG’s Perspective:
Agilysys, a distributor and reseller of enterprise computer systems, acquires Inter-American Data (IAD), a provider of property and materials management software to casinos and major resorts. Seeking to redefine itself due to shrinking hardware margins and a TTM revenue decline of 50%, this is Agilysys’ second acquisition in five months of a vertical market solution provider. There is some synergy, though, as Agilysys is an IBM Premier Business Partner, and IAD’s solutions run on IBM platforms. With $319 million in cash remaining, look for additional Agilysys software acquisitions in the coming months.
Verity (Nasdaq: VRTY) acquires NativeMinds
Category: Customer Support
Purchase Price: $3,800,000
Seller Revenue: $6,250,000 (Estimate)
Revenue Multiple: 0.61x
Payment Terms: Cash
SEG’s Perspective:
Verity Inc., a provider of search, classification and personalization software, acquires NativeMinds, developer of natural language, on-line customer support solutions. The $3.8 million, all cash deal is likely to come as a disappointment to NativeMinds’ investors, including Oracle, TA Associates, Convergsys, and CIBC, which reportedly sank some $40 million into the 5 year old San Francisco based company. The plan is to link Verity’s search capabilities with NativeMinds’ web-based customer assistance suite, as well as the online forms technology of another recent Verity acquisition, Cardiff Software. Verity is representative of a growing number of buyers seeking to acquire and aggregate technologies to spur growth and differentiate their offerings. For the six months ended 11/03, Verity revenues rose 24% to $55.5 million and net income rose 40% to $5.5 million.
EV: Enterprise Value = equity purchase price, plus seller’s interest bearing debt, minus seller’s cash & cash equivalents
1 : LFY = Fiscal Year-End: December
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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