Sparxent bullish on M&A

-by Thomas Rasmussen, Jay Lyman

As indicated in the results of our recent corporate development survey, companies once again have an M&A appetite. Some firms even need a second helping of deals. That’s the case with Salt Lake City, Utah-based Sparxent. The IT services vendor wrapped up three acquisitions recently and says it is hungry for more.

In terms of the deals it has closed, Sparxent picked up Russian firm Arbyte Group – along with its Rikkon subsidiary – at a steep discount. We estimate that the company paid just south of $20m, which amounts to a valuation of roughly 0.5x trailing 12-month revenue. This is in addition to its purchase of XAware in May, which we estimate cost Sparxent about $7m, and its pickup of NetworkD last August. According to our understanding, Sparxent is currently generating approximately $70m in pro forma revenue and intends to double that by next year, primarily through M&A. The company tells us that it is currently running a process on a half-dozen or so deals, one of which could well be announced later this week. What vendor might Sparxent be reaching for?

Top among potential targets, based on the fact that both Sparxent and XAware had board membership and investment from vSpring Capital, is another vendor in the venture firm’s portfolio: Penguin Computing. Penguin, which is reaching out to a larger business market with its high-performance computing software and services, fits Sparxent’s preference for open-source-based software combined with commercial licensing. Another vSpring-funded company that may be a target is Infusionsoft, which is focused on automated sales and marketing software for the SMB and midmarket, where Sparxent is aiming to expand. Additional possibilities include PS’Soft with its IT asset and services management software and Sybrant Technologies, an application and product development services firm catering to midsize customers that includes open source in its offerings.