GRC=Get Ready for Consolidation

Contact: Brenon Daly

After a pretty thin stretch of deals in the governance, risk and compliance (GRC) market, Thomson Reuters reached for startup Paisley Consulting last week. The deal comes after the two companies partnered for a year, but not in the conventional manner. Rather than the big company reselling the startup’s wares, Paisley actually resold Thomson’s tax and auditing product, Checkpoint. The two companies also had a fair number of joint customers.

We understand that Paisley wasn’t really looking for a deal. Founded in 1995, Paisley is still run – and was majority owned – by its founding husband-and-wife team of Tim and Stacey (née Paisley) Welu. (The pair will continue to run the business after the acquisition.) The Minneapolis–based company took only one round of outside money, a $10m slug in 2003 from Insight Venture Partners. Despite its beginnings, Paisley was no mom-and-pop shop. We understand the company is set to finish 2008 with sales of more than $40m.

The Thomson-Paisley pairing comes after several large software companies, which would be the most conventional buyers of GRC startups, inked deals of their own. Oracle stayed close to home, and grabbed existing GRC partner LogicalApps last year, while SAP made a big play for Virsa Systems in mid-2006. (As a side note on SAP’s move, we would mention that longtime Oracle executive Ray Lane sat on Virsa’s board and helped broker the initial partnership that led to the purchase.)

With Paisley gone, there are still a few high-profile GRC vendors in the market. BWise, which has its roots in the Netherlands, has a strong presence in Europe; OpenPages, which started life as a content management vendor before focusing on GRC; and a company that’s not unlike Paisley, Archer Technologies, which my colleague Paul Roberts recently profiled. We understand that both BWise and Archer, which is about half the size of Paisley, have been talking with potential suitors throughout the year. However, a month ago, Archer sold a 40% stake of the company to Bain Capital Ventures, which likely takes it off the block for now.