CDC Software’s rollup is rolling along

Contact: Brenon Daly

Since being spun off from its parent company less than a year ago, CDC Software has been rolling along with its planned rollup. It has done a half-dozen acquisitions of small, on-demand software companies to help expand its portfolio of ERP, CRM and supply chain management offerings. (It got bigger eyes earlier this year, when it made a short-lived run at fellow public company Chordiant Software.) In general, the technology has come from startups that have been passed over by the market. That’s certainly the case in CDC Software’s latest – and largest – acquisition, the purchase of TradeBeam last week.

Ten-year-old TradeBeam had burned through a mountain of venture backing and had snatched up the assets of three other vendors, but had struggled to actually build its business. (We understand that the company generated only about $9m in recurring revenue in 2009, and that projections for this year called for $10m in recurring revenue. That got the target around $20m in its sale to CDC Software, according to our understanding.)

Still, TradeBeam was able to develop some fairly useful software, thanks to its generous VC subsidy, that should fit well inside CDC Software. The company had two main product lines, which each accounted for about half of overall sales. TradeBeam sold global trade management software, which helps customers handle regulatory compliance and other aspects of the import/export business, as well as supply chain visibility, which provides additional capabilities around forecasting and collaboration with suppliers.

CDC Software’s recent acquisitions are part of a larger plan to slowly but steadily transition its business from selling software licenses to ‘renting’ software through a subscription model. Recurring revenue will still be a small slice of the overall $220m or so of revenue that the vendor is expected to put up this year. But if CDC Software can pull off its SaaS rollup strategy – and couple that with even a smidgen of organic growth – it could very well see a bump in its valuation. The transition to SaaS has certainly put a shine on the valuation of Concur Technologies and, to a lesser extent, Ariba. For its part, CDC Software, which is still majority owned by CDC Corp, trades at basically 1 times sales and 4x EBITDA.

Social CRM: haves and have-nots

Contact: Brenon Daly, China Martens

Even though social CRM is still an emerging market, the deals have been flowing. And it isn’t just one-off, conventional activity, but just about every conceivable type of transaction: public-to-private deals, private-to-private deals, a private equity-backed rollup and even (apparently) a wind-down. Among the more notable deals in this broadly defined space has been RightNow reaching for tiny startup HiveLive last September to add a community offering to its core CRM product and Attensity cobbling together the parts of three companies to form a European giant about a year ago. Attensity was back in the market last month, adding Biz360 to bolster its voice-of-consumer product.

Activity picked up again earlier this week, as Lithium Technologies confirmed that it had acquired Scout Labs for a reported $20-25m. As my colleague China Martens reports, the purchase adds Scout Labs’ social-media monitoring and analytics capabilities to Lithium’s management platform for customer communities. We would highlight the fact that Lithium’s buy comes just four months after the company raised its third round of funding, an $18m tranche that brought total funding to $39m.

While Lithium was raising fresh money – and putting it to work on an acquisition – it appears that another social CRM startup was coming up empty in its effort to get more cash and has pulled the plug. Helpstream, which apparently raised about $10m in two funding rounds from Mohr Davidow Ventures (MDV) and Foundation Capital, has shut its doors, the former CEO has written in a blog post. Helpstream’s website no longer works and MDV has erased Helpstream as a portfolio company, despite leading the vendor’s second round. (Calls to the VCs went unreturned.)

If indeed Helpstream has dried up (as it were), we might point to two reasons why the company struggled. For starters, it was basically a SaaS helpdesk provider that then tried to get into the online customer service community-building game. And if its customers were confused by that, they would have been additionally puzzled by Helpstream’s ‘freemium’ business model. In the end, Helpstream managed to land just 40 paying customers, compared to 200 customers using the free version of its product. puts together pieces on Jigsaw

by Brenon Daly

Just three months after raised $575m in a convertible note offering, the CRM vendor is dipping into its treasury for the largest deal in its history. The $142m purchase price for Jigsaw Data is more money than spent, collectively, on its previous seven acquisitions. (Add to that, there’s a potential $14m earnout that Jigsaw could pocket.) Yet, even after it pays for this pickup, will still have more than $1bn in cash on hand. The transaction is expected to close this quarter.

We understand that Jigsaw finished up last year with about $18m in revenue, and indicated that it was expecting $17-22m in non-GAAP revenue from Jigsaw for the three quarters that the company will be on the books this fiscal year. According to our calculations, is valuing Jigsaw at roughly the same level that the target is currently valued by public investors, at least on one basis metric. is paying about 7.9 times trailing sales for Jigsaw while its own market cap is about 8.3 times trailing sales. (Of course, shares of the on-demand CRM vendor are currently changing hands at their highest-ever level, having more than doubled over the past year.)

For Jigsaw, the sale to its longtime partner also represents a solid return for its backers, who wrote the checks that funded the company’s growth to 1.2 million members and more than 21 million contact records. Jigsaw’s three investors (El Dorado Ventures, Norwest Venture Partners and Austin Ventures) put in a total of $18m over the past six years. Strictly in terms of money in/money out, that means Jigsaw is returning almost eight times its investment. Not many startups have been able to deliver those kinds of returns recently because they’ve typically been overfunded and exit multiples have increasingly been under pressure.

Chordiant hits the bid

Contact: Brenon Daly

When Chordiant Software received an unsolicited offer from CDC Software in early January, we were pretty certain that deal had roughly 0% chance of getting done. We noted that Chordiant had a poison pill in place that would make it extremely difficult – and time-consuming – for CDC to finalize the deal. Since a quick close was one of the key concerns for CDC in its bid for Chordiant, we weren’t at all surprised to see the serial buyer pull its cash-and-stock offer just a week after floating it.

In addition to the timing, there was also the consideration that Chordiant shares traded above CDC’s offer the entire time it was out there. (In this case, investors agreed with Chordiant’s contention that the bid ‘undervalued’ the company.) That meant CDC would most likely have to reach a little deeper into its pocket to get the deal done. Although CDC indicated that it may well bump its bid, most observers expected the company to walk. (That’s just how the process played out three years ago, when CDC launched an unsolicited offer for another CRM vendor, Onyx Software, only to come away empty-handed.)

Flip the calendar ahead two months, and Chordiant (advised by Morgan Stanley) has pulled off a pretty rare trick: stiff-arming that unwelcome bid and then securing a richer payday for shareholders. (Most cases tend to look more like Yahoo, which is trading at half the level that Microsoft offered for the company two years ago. Yahoo shares have lost 20% of their value since Microsoft floated its bid, while the Nasdaq has flat-lined in that period.) And Chordiant didn’t just hold out for a nickel or a dime more for its shareholders. It got the highest price for its shares in a year and a half.

Under terms announced Monday, Pegasystems will pay $5 in cash for each share of Chordiant, for a total equity value of $161.5m. That’s 54% more than CDC thought the company was worth, and enough to get Chordiant’s board to (wisely) hit the bid from Pegasystems. Speaking of Chordiant’s board, we would note that chairman Steven Springsteel, who also serves as CEO, is now four for four in terms of helping to sell the companies where he held executive roles. As we noted three and a half years ago, when we first opined that Chordiant probably wasn’t a stand-alone vendor, Springsteel had seen a trio of his previous companies get gobbled up.

Bids for Chordiant

Date Suitor Offer Equity value EV/TTM sales multiple Status
January 8, 2010 CDC Software $3.46 per share $105m 0.7x Aborted
March 15, 2010 Pegasystems $5 per share $161.5 1.4x Closing in Q2

Source: The 451 M&A KnowledgeBase

A Coremetrics sale to

Contact: Brenon Daly

Could this be a case of history repeating itself? A Web analytics vendor pulls out at the last minute of a technology conference at a boutique bank, and then announces that it has agreed to a richly priced sale of the company. That’s the way it played out last fall with Omniture at ThinkEquity’s conference. And at least part of that has happened with Coremetrics this week at Pacific Crest Securities’ Emerging Technology Summit. (Coremetrics was slated to present at the event Thursday morning, but canceled its appearance, officially because the presenter was ill.)

Of course, there’s been a lot of M&A buzz around Coremetrics in recent weeks, with at least two sources indicating that the company had retained Goldman Sachs to represent it. As to who might be a buyer for the Web analytics shop, we come back to one name: We understand that the CRM giant was acutely interested in Omniture and, according to some sources, was the cover bidder in that process. (Omniture, of course, ultimately sold to Adobe in a somewhat puzzling pairing.)

Coremetrics’ analytics would fit neatly with’s sales and marketing offering. Both are also SaaS companies. And, as we noted last month, the profitable company, which has about $1bn in cash available, has announced plans to raise another $500m in a convertible offering. Altogether, that’s plenty of cash to cover a potential purchase of Coremetrics, which would probably go for several hundred million dollars. And if the Coremetrics sale parallels the Omniture sale in that the analytics company goes to a somewhat unexpected buyer, we might put forward Autonomy Corp as a possibility, as my colleague Nick Patience did in a recent report. The acquisitive British vendor also recently announced plans to raise a slug of money. All dressed up and nowhere to go

Contact: Brenon Daly, China Martens

We noted late last week that it has emerged recently that did indeed make an (unannounced) acquisition to help bolster its upcoming enterprise collaboration product, Chatter. The purchase of GroupSwim, which had just 30 customers, was undoubtedly a tiny one. That’s been the case in the five previous buys by, as well.

But now, the market is buzzing that may be looking to take on a larger deal. Why else would a profitable company that already has $1bn on its hands raise another $500m in an upcoming convertible offering? If that sort of reasoning worked for Occam, then it’ll work for us. All that remains, then, is to figure out where is going to spend that money.

It turns out that coming up with a shopping list for is actually a bit more complicated than it is for many other companies. For starters, the firm positions itself as a platform vendor, which means that it is designed to be open and inclusive. That is exactly counter to M&A. So while it might make sense for to move into marketing automation (MA), for instance, by picking up Unica or Constant Contact Inc, a play like that would immediately alienate all other MA providers on AppExchange. (Currently, there are 29 different MA applications listed on AppExchange, among more than 170 applications in the broader ‘marketing’ category.) has worked around that by looking more to partner than purchase, as it did to co-create, a partnership with Unit 4 Agresso. Clearly, could afford to buy Unit 4 Agresso outright. (The Dutch company has a market capitalization of about $650m.) We suspect that partnerships might be the approach that uses to cover human capital management (HCM). A number of rumors have tied the CRM giant to either of the big HCM players, Taleo or SuccessFactors. (As an aside, we might be willing to pay money to listen to any M&A negotiations between’s laidback, New Age-y chief executive Marc Benioff and the blunt-talking, hard-driving CEO at SuccessFactors, Lars Dalgaard. We can only imagine the look on Dalgaard’s face if Benioff invited him to sit zazen, which wouldn’t be out of character for the honcho.)

So having scratched most names, what’s one company that we could imagine reaching for? InContact. The acquisition would boost’s Service Cloud, taking the firm even deeper into the call center. The (hypothetical) deal would fit nicely with InStranet, which acquired in mid-2008 for $31.5m, and would hardly break the bank. InContact has a market capitalization of merely $90m. And as a final bonus, would finally be able to shed its limited ticker ‘CRM’ in favor of the bigger, more encompassing ticker of ‘SAAS,’ which is what inContact currently trades under. goes for a GroupSwim

Contact: Brenon Daly, China Martens

Almost two months ago, we noted that several sources had indicated that may have reached outside its own walls for a little help in getting its Chatter product out the door. ( showed off Chatter, an enterprise collaboration product, at its Dreamforce conference in November, although it is not yet available.) The official company line at the time was that Chatter was developed in-house, which is consistent for acquisition-averse The vendor has done just six deals – all of them tiny – in the decade that it has been in business.

In recent days, it has surfaced that did indeed acquire a startup. A visit to the homepage of GroupSwim indicates that the company ‘is now part of’ We have followed GroupSwim since mid-2008, with my colleague Kathleen Reidy initially writing that the startup’s pairing of semantic analysis with content sharing/collaboration appeared to be a promising approach in a rather crowded market. When we last visited with GroupSwim a year ago, the 15-employee firm claimed 30 customers. It was still living off angel money.

In contrast to the rather meager financial situation at GroupSwim, is closing in on an all-time price for its shares. (Current market capitalization: $8.6bn, which works out to a triple-digit P/E ratio on a trailing basis.) And the on-demand giant just priced $500m in a convertible note offering that will bring its total holdings of cash and marketable securities to $1.5bn. With such a rich treasury, could likely buy hundreds more startups like GroupSwim. Or maybe it’s thinking of something bigger?

Chordiant: hunter turns hunted

Contact: Brenon Daly

Just a month ago, Chordiant Software was a hunter. Now it’s the hunted. The call-center software vendor attracted an unsolicited – and rather unsatisfying – offer from CDC Software earlier this week. The unusual twist is just the latest development in the already unusual process around the sale of fellow software company Kana Software. Recall that Chordiant, after failing to land Kana, took to sniping at the deal as an activist shareholder. None of that had any impact, as the sale of Kana to midmarket buyout firm Accel-KKR closed in late December.

Chordiant’s unsuccessful bid for Kana came up in CDC’s rationale for making what it terms a ‘proactive’ offer for Chordiant, with acquisitive CDC saying the bid was partly driven by Chordiant’s recognition that it was a ‘sub-scale’ software company. And recently, Chordiant has been falling even further away from being a software vendor of scale. In its most recent fiscal year, which ended September 30, overall revenue dropped by one-third. Granted, that fiscal year covered one of the most difficult economic periods since the Great Depression. But even in the current fiscal year, most Wall Street analysts don’t project that Chordiant will grow much, if at all.

So what does all that mean for Chordiant, which has remained silent to this point on CDC’s offer of $105m in cash and stock? We suspect it’ll probably play out similarly to CDC’s bid in 2006 for another CRM provider, Onyx Software. In that would-be acquisition, CDC was also an unwelcome bidder for Onyx, and the process unfolded fitfully. (Onyx ultimately sold to rollup Consona.) Not that we’re saying CDC will necessarily pull its bid for Chordiant, as it did for Onyx.

Instead, on the other side, we suspect Chordiant will try everything in its power not to end up inside CDC. One key defense: Chordiant has a poison pill in place that doesn’t expire until mid-2011. Also, Chordiant shares are currently changing hands above CDC’s offer of $3.46 for each of them. So if CDC, which is planning to hit the road next week to help sell Chordiant investors on the deal, really wants to add Chordiant’s front-office products to its existing back-office wares, we think it’ll have to present a topping bid. On a call discussing the proposed transaction Friday, CDC chief executive Peter Yip said he’s ‘open minded’ to raising the offer.

M&A ‘chatter’ around

Contact: Brenon Daly, China Martens

Official word from is that its recently announced Chatter product was developed in-house. And that would certainly be in keeping with the company’s history of staying away from M&A. Since it opened its doors a decade ago, has done just five tiny deals. The vendor certainly has one of the lowest ratios of total M&A spending (probably around $70m) to market capitalization ($7.7bn) of any of the big software vendors.

Nonetheless, there was some chatter (if you’ll pardon the pun) that may have acquired some technology from a small startup to shore up the recommendation engine portion of Chatter, a collaboration/social networking offering that’s slated to come out next year. The M&A speculation centered on a startup that perhaps provided some natural-language search capability. We would note that a small shopping trip by – if, indeed, there was one – to get some social networking/natural-language technology wouldn’t be without precedent. Rival CRM vendor RightNow tucked in HiveLive, which had just 25 customers, in a $6m deal last summer.

Whether or not went shopping for part of Chatter, it’s worth pointing out that the firm has used M&A as a way to go after Microsoft’s SharePoint in the past. In early 2007, the company picked up Koral, an early-stage content management startup that had effectively been incubating. (And on a smaller scale, several months after that, it quietly acquired a tiny social networking startup, CrispyNews.)

However, we’re guessing that those purchases, particularly the Koral deal, haven’t generated the returns that might have hoped. The vendor originally said that Salesforce Content – an add-on, extra-cost module based partly on Koral – could do to SharePoint (among other document management offerings) what did to Siebel in CRM. That hasn’t come close to happening. In fact, just announced that Content will be available free of charge to all customers.

‘What’s up with Omniture?’

Contact: Brenon Daly

It wasn’t quite shouting ‘fire’ in a crowded theater, but an early Tuesday afternoon development at an investment conference concerning Omniture certainly sparked a firestorm of speculation. During the luncheon at ThinkEquity’s 6th Annual Growth Conference in San Francisco, word came out that Omniture had scrapped its presentation, which had been scheduled for 1:30 p.m. PST. Chief executive Josh James was slated to speak.

Immediately, the money managers began trying to read between the lines. Was the company in play, or had James just missed his flight or something like that? Speculation was flying around the lunch tables and hallways, with people pulling in all sorts of information. One guy noted that the company’s CFO didn’t show up at his scheduled presentation at Deutsche Bank’s technology conference on Monday, either. Another chimed in that maybe executives were delayed by the heavy thunderstorms in Salt Lake City, where Omniture is based. Meanwhile, both the price and trading in shares of Omniture was picking up, after just bumping along up to that point.

As more people at the ThinkEquity conference started gossiping about Omniture, consensus grew that something big was brewing at the Web analytics firm. By the time the stock was halted, just ahead of the closing bell, speculation had shifted to certainty: Omniture was getting taken out. The only question was who was nabbing the company. For the record, not a single one of the hallway matchmakers picked Adobe Systems as the buyer. (Under terms of the deal, Adobe will hand over $21.50 per share, or $1.8bn, for Omniture.) Instead, the names that surfaced as potential acquirers of Omniture included Microsoft, Google and