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.

The ‘new’ Old Media

-by Brenon Daly, Yulitza Peraza

With investment bank Allen & Co opening its annual conference on July 9 in Sun Valley, Idaho, we thought we’d take a look at what sort of shopping the traditional media companies, which make up most of the confab’s attendees, have been doing recently. The short answer: They’ve been busy. And a lot of the buying has been Old Media picking up New Media. (We’ve noted in the past how Allen & Co has re-tooled its business to meet the change in deal flow.)

In the first half of this year, traditional media companies have spent more on Internet content companies than during any other comparable period. Just Tuesday, for instance, Gannett picked up the chunk of ShopLocal that it didn’t already own. Additionally, NBC took a majority stake in Web content and broadcast sports provider World Championship Sports Network for an undisclosed sum last month. (This acquisition, the network’s fourth since 2006, comes just in time to help bolster its upcoming coverage of the Olympic Games in Beijing.) Also, CBS paid $1.8bn in May for CNET, one of the original online information sites. Altogether, since 2002, Old Media has put more than $13bn toward online purchases.

If anything, we expect the pace to pick up in the second half of 2008, as media companies continue to expand their digital offerings. The shopping spree, however, is a bit late because the model has been broken for a long time. It used to be that traditional media companies could run fatly profitable by simply trading their information and entertainment for your dollars, whether the payment came through subscription or advertising. That exchange worked as long as the information and entertainment could be kept closely controlled. In other words, it worked until the Internet came along.

Acquisitions of content companies by media outlets

Period Deal Volume Deal Value
Jan-June 2002 9 $424,000
Jan-June 2003 7 $106m
Jan-June 2004 3 $87m
Jan-June 2005 10 $1.11bn
Jan-June 2006 26 $1.18bn
Jan-June 2007 32 $2.07bn
Jan-June 2008 38 $2.18bn

Source: The 451 M&A KnowledgeBase