Category: services

Kony Solutions acquires SAP app developer Sky Technologies

Ben Kolada

Contact: Ben Kolada, Thejeswi Venkatesh

After providing offline sync features for applications connecting to SAP’s ERP systems, Kony Solutions has decided to bring those apps in-house with the acquisition of Sky Technologies. Melbourne-based Sky provides preconfigured apps that integrate with SAP software. IBM, SAP and Kony competitor Appcelerator have also recently announced purchases that bolstered their app development platforms.

Terms of the deal were not disclosed, but we feel this should be viewed as a tiny tuck-in for Kony, which has 900 employees. Sky’s headcount is reportedly in the 30-40 range.

Kony is increasingly targeting the internal business requirements of enterprises after working with them to develop their customer-facing apps. Sky aids this initiative. By tucking in Sky, Kony can now offer customers a broader range of business-to-employee apps, including those that integrate with SAP environments.

Respondents in our April 451 Enterprise Mobility Survey said that their organizations place higher priority on development of apps that serve employees than apps that serve customers. To a degree, SAP acknowledged this sentiment when it announced that it was acquiring Syclo, which provides mobile work order software for field workers. Underscoring the value of these companies, we’re hearing that SAP paid roughly $100-150m for bootstrapped Syclo.

For more real-time information on tech M&A, follow us on Twitter @MAKnowledgebase.

Dell as a mobile manager?

Ben Kolada

Contact: Ben Kolada, Rachel Chalmers, Chris Hazelton

Dell hasn’t hidden its intentions of leveraging its hardware legacy to extend into the enterprise IT market, particularly in regards to software. The PC and server giant recently reinforced its goals with the $2.6bn acquisition of systems management vendor Quest Software. But, as we point out in a recent report, its next move is likely to be in mobile management.

Former CA Technologies CEO and current head of Dell’s software division, John Swainson, made our job a bit easier. Swainson hasn’t been explicit with his plans, but we read some of his recent statements as a signal that Dell may make an imminent move into mobile device management.

That makes sense. Connected devices are the primary target for new applications. They’re also fountains of data that can be gleaned and distilled into BI – which is among the four focus areas for Dell’s software group: security, systems management, business intelligence and applications. In a report detailing the possible future of Dell’s mobile management, we prognosticate about how the company may move into this sector, and with whom. Click here to read the full report.

For more real-time information on tech M&A, follow us on Twitter @MAKnowledgebase.

To remain relevant, Neopost acquires GMC Software

Contact: Thejeswi Venkatesh, Ben Kolada

In an attempt to remain relevant in the 21st century and beyond, French mailing and shipping systems provider Neopost announced on Thursday that it is acquiring its Swiss partner, GMC Software Technology. GMC provides customer communications management software that enables businesses to design and publish print and online marketing content as well as create and manage customer surveys.

By now, everyone knows that physical mail is a thing of the past. Consumers across the globe have turned to email and other digital communication methods. Unless Neopost modernizes its product line, it risks becoming obsolete. The GMC pickup is an attempt to remain relevant in a digital world. Right now, four of the five products Neopost lists on its website are postage meters, folder inserters, addressing systems and letter-opening systems. Not exactly futuristic products.

GMC’s software helps combine data from different databases to create customized communications for each customer in a dynamic manner. The software also helps measure and track customer responses to improve future communications. The Swiss company, which has had particular success in the banking and insurance verticals, generated revenue of about $45m last year (based on year-end exchange rates). The headcount-heavy firm employed 300, including 130 engineers.

Neopost hasn’t yet disclosed the price it is paying for GMC, but in the conference call discussing the transaction the company said it paid about 2 times revenue, and noted that the deal also includes a significant earnout based on aggressive revenue goals.

Avnet adds to Q3 M&A jump with three acquisitions

Contact: Brian Satterfield

Technology M&A deal volume in the beginning of the third quarter is far outpacing the year-ago period, with particular help coming from IT distribution giant Avnet Technology Solutions. The Phoenix-based firm has already announced three acquisitions this quarter. (Overall, Q3 volume through July 10 hit 119 deals worth $9.8bn, versus just 71 deals worth $6.7bn in the year-ago period.)

Continuing with an M&A strategy that it has employed frequently in the past, Avnet further extended its global IT distribution footprint last week by purchasing three foreign competitors.

The first couple of acquisitions Avnet announced – German IT distributors Magirus and Altron – bolstered the company’s European presence. Magirus and Altron give Avnet access to more than 6,500 customers in the region and mark the company’s third and fourth buys in Germany. After taking a brief break for the US’s Independence Day, Avnet returned to its international dealings last Thursday, reaching into Japan for 40-year-old semiconductor distributor Internix. Internix generated $260m in trailing revenue, making it one of the largest targets Avnet has ever acquired.

Inorganic international expansion is fairly typical among large IT distributors. Nearly all (80%) of the 26 IT distribution firms Avnet has acquired over the past decade have been headquartered overseas. Competitor Ingram Micro has also employed this approach in 11 of its 13 distribution acquisitions. However, we’d note that international expansion isn’t the only game being played. Ingram Micro’s biggest deal, which also came last week, wasn’t made in the interest of moving into new geographies. Ingram Micro announced on July 2 the priciest acquisition in the distribution sector in nearly four years when it paid $650m for Indianapolis-based BrightPoint in order to strengthen its mobile device offerings.

Independent now, but will independenceIT someday be acquired?

Ben Kolada

Contact: Ben Kolada, Thejeswi Venkatesh

Application hoster and desktops-as-a-service provider independenceIT (iIT) announced on Wednesday the tech-and-talent acquisition of cloud management platform Veddio Cloud Solutions. The cloud aggregator’s dashboard platform will be used to control iIT’s cloud workspace products. According to The 451 M&A KnowledgeBase, this is iIT’s first acquisition on record, but it won’t be its last. As it continues to fill out its product platform, will the company someday turn from acquirer to acquired?

Veddio offers a dashboard application that integrates services from a variety of Internet infrastructure providers, such as telco competitive carriers and MSPs. Through its dashboard, Veddio offers white-label application and cloud hosting, hosted PBX, email hosting, managed firewall, domain name registration, software virtualization and data backup and recovery services. As of the acquisition announcement, the five-employee firm had approximately 150 channel partners.

Though this is iIT’s first acquisition, according to our records, the company is planning additional inorganic moves both in the short and long term. We’re told it is eyeing another tech-and-talent acquisition. Specific details weren’t provided, but the next play will likely focus on the delivery of cloud services.

We’d also note that, although currently becoming more of an acquirer, independenceIT could someday become acquired. The small firm (it has 31 employees) could already be considered a prized target. The pickup of Veddio should provide for triple-digit-percent growth and when we last covered iIT, in 2010, we noted that it had already been profitable for two years.

For more real-time information on tech M&A, follow us on Twitter @MAKnowledgebase.

Box eyes a new round at $1bn valuation

Brenon Daly1 Comment

Contact: Brenon Daly

Box is back in the market. Several sources have indicated that the enterprise content management and collaboration startup is currently looking to raise $100m in new funding, on top of the roughly $160m it has already pulled in. Box’s valuation is said to be north of $1bn.

That’s a heady valuation for a company that’s likely to finish this year at about $60m, according to sources. The round (assuming it does get raised) comes at a time when competition is heating up for Box. For instance, Citrix has made a series of acquisitions to piece together an enterprise collaboration and file-sharing platform. (Those small deals came after Citrix was rumored to have missed out on acquiring Box at a price thought to be roughly $600m.)

Likewise, VMware has used small purchases to bolster its Project Octopus while its parent, EMC, recently reached for synchronization startup Syncplicity to expand its collaboration offering. Other tech giants have rolled out their own collaboration platforms through organic development, such as Google’s Drive, Microsoft’s SkyDrive and even Apple’s iCloud. (Additionally, Microsoft is adding much more cloud functionality to its SharePoint product in its next release, due out late this year or early next year.)

Box – along with dozens of other cloud- and drive-themed rival offerings – effectively provides centralized storage as well as a shared file system for all of the documents at an enterprise. As we see it, the seven-year-old company is currently facing two main challenges, and is likely to put at least some of its new funding toward these.

First, since Box is competing as an enterprise software vendor, it needs to hire more sales agents to land enterprise accounts. We understand that the company has added dozens of experienced enterprise sales agents and is looking to bring on dozens more. Second, Box needs to establish itself as a platform on which other software shops can develop additional applications and enhancements. Earlier this year, the company introduced a new API – its first in four years – to draw in more developers.

For more real-time information on tech M&A, follow us on Twitter @MAKnowledgebase.

CGI growing globally with acquisition of Logica

Ben Kolada

Contact: Ben Kolada

Consolidation in the IT services segment took a leap forward today, as Canadian systems integrator CGI Group announced that it would pay £1.7bn (about $2.7bn), or £2bn when including net debt, for British counterpart Logica. We’ve already written about IT services deals happening on a smaller scale in the US, but this transaction takes the cake as being the largest cross-border deal since NTT bought Dimension Data in July 2010 for $3.2bn.

Specific to CGI, this is its largest acquisition on record, and comes almost two years to the day after it announced its previous high-priced transaction, the nearly billion-dollar purchase of systems integrator Stanley Inc. The Stanley buy itself was a geographic play, meant to expand CGI’s footprint in the US. The rationale for today’s reach for Logica is no different.

CGI is buying Logica as a pure geographic move meant to diversify its revenue globally. Currently, CGI’s revenue is split about half and half between the US and Canada, with only 6% coming from Europe. Logica, on the other hand, generates almost no revenue from North American operations. Its revenue mix is heavily slanted toward Western Europe, with its top three markets by country being France, the UK and Sweden. If and when the deal closes, the combined company will have a presence in 43 countries. The transaction will also more than double CGI’s revenue, creating the sixth-largest IT services provider worldwide.

Diversification is so key to CGI’s strategy that it is tapping nearly every possible outlet to pay for its larger rival. CGI will issue 46.7 million subscription receipts (exchangeable into new Class A shares), secure a £1.25bn term loan from CIBC, National Bank of Canada and Toronto-Dominion Bank, and draw down £405m from its existing credit facility.

Although dilutive, CGI’s shareholders so far approve of the acquisition. Shares of the Canadian company, which trade on the NYSE, were up 12% at midday. Although the deal would seem to undervalue Logica by one metric, its shareholders have reason enough to approve of the acquisition. While the transaction values Logica at about half times sales (the two most recent billion-dollar-plus IT services acquisitions, both announced last year, were done for 1x sales), CGI’s offer represents a heady 60% premium to Logica’s closing share price on May 30, and a 50% premium over the average closing share price for the prior month. Bank of America Merrill Lynch advised Logica on the deal.

For more real-time information on tech M&A, follow us on Twitter @MAKnowledgebase.

All Covered covering the US

Ben Kolada

Contact: Ben Kolada, Thejeswi Venkatesh

IT services shop All Covered has been on a steady M&A tear over the past year. Since its sale to Japanese consumer electronics giant Konica Minolta, announced in January 2011, All Covered has acquired nine complementary vendors throughout the United States. It’s expected to continue acquiring, but could see increased competition for its desired targets if M&A interest in this sector continues to rise.

All Covered is now the US expansion platform for Konica Minolta’s Business Services division. With funding from Konica Minolta (which has earmarked $500m for its Business Services group), the company has bought several IT services shops primarily for geographic expansion. Its dealmaking has expanded All Covered, which is based in Redwood City, California, into nine different states. So far, it’s taken a buckshot approach, casting a wide range rather than focusing on single market penetration. No two of its acquisitions have been in the same state.

However, its rapid M&A pace may slow if the IT systems integrator and professional services sector continues to attract interested acquirers, and if bidding competition increases as a result. M&A interest in this sector has risen dramatically since the bottom of the recession. According to The 451 M&A KnowledgeBase, deal volume in this sector last year nearly eclipsed the previous record set in 2006. (We’d note that while the majority of acquisitions are of systems integrators and IT professional services shops, purchases of email marketing and website design firms in particular are on the rise.)

Meanwhile, consolidation among IT services firms isn’t the only strategy playing out. Acquirers from all corners of the IT industry, as well as some non-tech shops, have made plays in this sector.

Acquisitions of IT services vendors

Year Deal volume
2011 633
2010 581
2009 478
2008 421
2007 577
2006 652

Source: The 451 M&A KnowledgeBase

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Groupon diversifies its dealmaking

Contact: Brian Satterfield

Before its IPO last November, Groupon acquired 16 companies, 10 of which were competitors that expanded the daily deal heavyweight’s reach into regions such as South America, Asia, Africa and the Middle East. Having grown its coupon empire to cover most corners of the globe and established itself as the sector’s market leader, Groupon has since taken a broader approach to M&A, buying into areas that complement its core coupon business.

Since the capital infusion that accompanied its Nasdaq debut last November, Groupon has been on an acquisition spree. More than one-third of its total 25 deals have come in just the past five months. In fact, according to its recently filed annual report, the company completed six transactions in just the first two months of 2012. But with the exception of the purchase of Mertado in January, Groupon has strayed away from scooping up other daily websites, instead targeting businesses that allow the company to bolster its online community and commerce capabilities. More specifically, Groupon’s recent M&A moves have been primarily to obtain the startups’ expertise in information database development, search engine development, location-based technologies, merchant products and support, and transactional marketing.

Earlier this week, Groupon picked up San Francisco-based Ditto, the maker of an iPhone application that enables users to plan activities with friends based on their location. A Ditto blog post hinted that the deal was primarily geared toward Groupon’s need to add community features, the same rationale that likely drove the company’s purchase in February of online travel enthusiast community Uptake Networks. Groupon’s other post-IPO mobile play also came in February, when it reached for VC-backed Kima Labs, which developed an iPhone application that allowed consumers to make online purchases with their phones. That same month, the company made yet another e-commerce move when it took out online shopping recommendation software provider Adku.

It’s also worth noting that while Groupon has expanded its M&A strategy in terms of technology, its geographic focus has clearly shrunk. Eight of the nine companies it has acquired post-IPO have been based in the US.

On Assignment pays up to bolster IT staffing practice

Contact: Brian Satterfield

In a move designed to bolster its presence in the IT staffing sector, hybrid staffing services provider On Assignment made the largest-ever acquisition in the sector earlier this week when it purchased Apex Systems for $600m in cash and stock. The transaction was also one of the largest credits ever for Wells Fargo Securities, which advised Apex on the sale. Meanwhile Moelis & Company, which got its second $500m-plus print in as many days, worked the buy side of the deal.

Richmond, Virginia-based Apex was an attractive acquisition target for On Assignment both for its growing revenue as well as its sheer size in taking on the larger players in the sector that also handle both traditional and IT staffing duties. Apex, which posted a record $705m in revenue in 2011, more than doubles On Assignment’s total revenue to $1.3bn. (On its own, On Assignment wasn’t expecting to top $1bn in sales until 2015.) Apex had a compound annual revenue growth rate of 30% over the past 12 years and has recovered well from the recession, nearly doubling its own revenue since 2009.

On Assignment claims that the transaction makes it the second-largest IT staffing firm in the US, helping the company to keep its technology practice competitive with some of its much bigger rivals. One such competitor, Adecco, brought in $2.2bn from its IT division alone in 2011, about eight times more than On Assignment’s IT staffing business generated. Apex’s revenue more than triples On Assignment’s IT revenue and helps narrow what had once been a huge gulf between the two rivals. And the company didn’t blow the bank to get the bulk: On Assignment paid 0.9 times trailing sales for Apex, or roughly the same multiple it shelled out when it made its only other M&A move, 2007’s purchase of Oxford Global Resources.