Madison Dearborn Acquires Fieldglass — Vendor Garners Estimated 6.5X+ Top-line Valuation

Madison Dearborn, a Chicago-based private equity firm, just announced it purchased Chicago-based services procurement software / VMS provider Fieldglass. According to the announcement, the transaction was valued "in excess of $220 million". By our estimates based on Fieldglass' rumored top-line, we believe the transaction was done at a 6.5X+ top-line multiple, which represents a very healthy valuation. The deal follows fellow Chicago private equity firm 2008 GTCR's buyout of rival VMS/MSP IQNavigator.

Spend Matters has written extensively about Fieldglass in the past. In VMS deals, they are nearly always short-listed as a top provider (along with IQNavigator and also quite often Beeline, PeopleClick Authoria, and ProcureStaff Technologies, and many others). They are, however, an VMS favorite because of their overall interface, configurability and ease of use, not to mention the depth of their platform to tackle both contingent and non-contingent services spending (including statement of work (SOW) arrangements).

Many vendors were rumored to be bidding for Fieldglass, including Ariba (Spend Matters has argued for sometime that Ariba needed Fieldglass' technology and MSP relationships to assume a services procurement leadership position, especially in the contingent area). But for Ariba and other software companies, anything over a 4-5X on revenue would be a tough nut to crack on an accretive basis. But Madison Dearborn's deep pockets may ultimately prove prescient indeed if Fieldglass becomes the dominant VMS in the market and if they can drive further spend penetration in the existing Fieldglass base (which we estimate is still <25% penetrated on average). But without question GTCR and IQNavigator won't sit still. And IQNavigator -- not to mention many of the other VMS providers mentioned -- is more than capable of beating Fieldglass in a hand-to-hand combat selection bake-off, depending on evaluation criteria.

Check back on Spend Matters in the coming days as we add more color and depth to our analysis. In the meantime, we would encourage you to download our latest research in the VMS/MSP arena. You can also search "Fieldglass" in the search area of Spend Matters to pull up past articles. And one final thought for the night .. this whole thing looks like a "Subway" series PE rivalry between Madison Dearborn (North Side) and GTCR (South Side) based on their respective locations within and just North of the loop -- not to mention their proclivities for services procurement deals.

Jason Busch

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