Clarifying the Rearden / Amex Relationship

I did a shoddy job last week explaining the Rearden / Amex relationship -- at least in my initial posts on the subject. If you've read my blogs on the news recently, I actually went back and edited them a bit from the originals after a briefing from Rearden later in the week. But to make sure that no one got the wrong impression of the relationship and deal terms, I wanted to take a quick minute to post some clarifications from Rearden to my initial statements.

First, from an investment perspective, the deal includes both a "minority equity stake and a board seat". Regarding the minority equity stake, there have been various rumors in the blogosphere that the terms of the deal placed a 8-10 revenue -- potentially greater -- revenue valuation multiple on Rearden. While I do not have an exact number or multiple, it's safe to say that Rearden currently has the richest current valuation in the privately-held Spend Management vendor sector, despite relatively modest revenue numbers (yes, larger than what it's rumored others offered to Emptoris, at least earlier in 2006). While this is great news for the Spend Management sector, the premium multiple certainly comes from the network effect -- and channel-driven potential -- of the Rearden business model. Clearly, Amex believes it's investing in a rocket ship with similar -- or greater -- potential than a Let's hope they're right.

Second, regarding the reseller agreement, "American Express the ability to sell uniquely branded (and in some cases uniquely featured) access to the Rearden Commerce Network … [But] It is still all on our single-instance model." In effect, Rearden will still "fully own the network" as there is only "one instance that all" Rearden's customers use. But the Amex deployment will be privately labeled the AXIOM marketplace.

Hopefully this clarifies the deal terms for everyone involved -- and the RSS groupies like myself who have followed the news closely. My apologies to everyone for getting a few of the facts incorrect in the first place.

Jason Busch

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