Metastorm in the market in a big way

Contact: Brenon Daly

If Metastorm does re-paper an S-1, it will be a much larger company than the one that filed for an IPO last year. (The business process management (BPM) vendor put in its paperwork in mid-May and then pulled it in mid-September.) The growth will come both organically and from acquisition, CEO Bob Farrell said Monday during a presentation at the JMP Securities Research Conference.

In terms of organic growth, Farrell projected that the company would ring up about $90m in revenue this year, up from about $77m in 2008. Additionally, Farrell said he expected to add to the company’s top line with a shopping trip. We understand Metastorm has three term sheets out for possible acquisitions, with one possibly closing in the summer. One of the potential deals could double the company’s revenue. Farrell said his company has considered outside funding for a purchase, which is how it covered its 2007 acquisition of Proforma.

In terms of target markets, Metastorm is looking in several areas, including risk and compliance, collaboration and document management. In terms of possible BPM-document management transactions, we would note that we recently heard of deal flow going the other way. Open Text, having consolidated much of the content management market, said it may well look to buy its way into the BPM market.

Market imbalance

The markets are shrinking. And we’re not just referring to the trillions of dollars of value that have been lost from the New York Stock Exchange and the Nasdaq over the past year. Instead, we’re talking about the actual number of companies on the markets.

Listings rise and fall over the years, as companies go public or get acquired. At least, they do in normal years. But in a year like 2008, with black swans flying across the sky, the number of listings just falls (rather like the prices of the stocks that remain on the exchanges). Already this year, we’ve seen some 62 US publicly traded companies get acquired. On the other side of the ledger, we’ve had fewer than 10 technology IPOs since January. (And don’t look for Metastorm, which filed to go public in mid-May, to debut on the Nasdaq anytime soon. The company pulled its planned offering on Thursday.)

In terms of M&A dollars, as you might guess given the state of the markets, the companies that trade on them have been sharply marked down, as well. While the number of deals has dropped 27%, the value of those deals has plummeted twice that amount (56%). In addition, spending on public company deals has declined even more than the overall tech M&A market, which has sunk about 40% in terms of dollars spent so far this year.

Acquisitions of US public companies

Period Deal volume Deal value
January 1-November 14, 2007 85 $250bn
January 1-November 14, 2008 62 $109bn

Source: The 451 M&A KnowledgeBase