No-go IPO for RedPrairie

Contact: Brenon Daly

Scratch another name off the list of IPO candidates. RedPrairie, which had filed to go public in late November, instead sold on Tuesday to buyout shop New Mountain Capital. The sale moves the supply chain management software vendor from one private equity portfolio to another. (We understand that the two book runners on the proposed offering – Bank of America Merrill Lynch and Credit Suisse Securities – both advised RedPrairie on the deal.) In mid-2005, Francisco Partners acquired the company for $237m and subsequently rolled up another half-dozen smaller shops. Ahead of the proposed offering, Francisco owned 90% of RedPrairie.

The trade sale of RedPrairie isn’t all that surprising. (Nor, for that matter, was the fact that it put in its prospectus. We noted a month before the company officially filed to go public that it was getting close to an offering.) Looking at the financial profile of RedPrairie, it was hard to see Wall Street getting too excited about the vendor. Undoubtedly, it is profitable and hums along at a decent 20% EBITDA margin. But the top line leaves a lot to be desired.

Revenue at RedPrairie dropped 12% in the first three quarters of 2009, with license sales declining twice that level. In the first three quarters of last year – which was, admittedly, an extremely tough time to sell enterprise software – RedPrairie sold just $27m of software licenses. Meanwhile, rival JDA Software was able to generate twice as much license revenue ($60m) during the same time frame. JDA even managed a slight increase in sales of its software, compared to a double-digit percentage decline at RedPrairie.