Earlier this week, Accel-KKR, a partnership between two well-established venture capital/private equity firms, announced it had sold iTradeNetwork, a procurement/supply chain vendor in its portfolio, to Roper Industries. According to PC World's take on the acquisition announcement, "Roper Industries said Monday it plans to buy on-demand SCM (supply chain management) software vendor iTradeNetwork from private equity firm Accel-KKR for US $525 million ... Some 6,200 customers use iTradeNetwork's offering, which is aimed at the food industry ... The company's contracts have enjoyed a 99 percent renewal rate."
One analysis of the deal suggests a moderate valuation: "Analysts at Key Bank, in a research note found on Thomson One Analytics, wrote that the transaction is valued at 9.5x iTrade's estimated 2011 Ebitda of $55 million." Additional sources, if the previous Ebitda number is accurate, suggest that ITradeNetwork realized strong growth in recent years: "Prior to the merger [which brought together iTradeNetwork and Amphire under the iTradeNetwork banner], Dun & Bradstreet estimated iTradeNetwork had 2007 revenue of $4.1 million ... [analysts believe the combined entity] would clear $23 million in 2008 sales, according to the San Francisco Business Times." Growing from $23 million in 2008 sales to $55 million in 2011 Ebitda is quite impressive, although there is likely something going on behind these estimates (still, even if these numbers are only directionally accurate, this represents a very positive growth trend).
I've been surprised within the procurement and supply chain sector at how vertical specialists like SciQuest and iTradeNetwork have been able to fly under the radar of the broader market but dominate their chosen verticals. It used to be that retail was the one vertical sector where specialists clearly had a leg up. But now, as an increasing number of specialist vendors have focused on codifying the IP necessary to analyze, source, transact and collaborate with trading partners in specific verticals, it's become clear that the Spend Management market will be impossible for an ERP provider or large best-of-breed provider like Ariba to build a truly dominant market position across industries unless they begin to pick up vertically-focused assets. Moreover, with deals and valuations like this, it's also becoming more clear that the integration of physical information and financial supply chain flows between buyers and suppliers is going to become increasingly important in the coming years. No longer can procurement, supply chain, treasury and payables stand alone.