According to the press release, Altegrity, "the parent company of leading data and information services, employment screening and investigative services providers, announced today the close of the acquisition of CVM Solutions, a leading provider of supplier management technology and data solutions. CVM Solutions will become part of Kroll, an Altegrity subsidiary, which is the world's leading risk consulting company providing a broad range of investigative, intelligence, financial, security and technology services. Terms of the transaction were not announced."
Spend Matters estimates that CVM's revenues were somewhere in the $12MM range (+/- 15%) with a similar split of business across supplier content, software and enabling services segments of the business. While no valuation has been ascribed to the deal, typical transactions in the broader procurement sector have seen revenue multiples in the 2-4X revenue range in recent quarters (we've also seen investments done at a pre-money valuation of over 10X revenue, at least in one case, although 3-5X revenue is more like it, for typical higher-growth vendors).
We suspect, based on a variety of extenuating circumstances including Kroll's own valuation and the importance that PE firms ascribe to managing transactions to specific multiples rather than looking primarily at solution up-sell/cross-sell synergies as a first priority (Altegrity is owned by a big PE firm) that the deal was done at the lower end of the spectrum, potentially even under the typical ranges we see. We are happy to trade information on this "off the record" for those who reach out, and will not be commenting publicly on multiples regarding this transaction on the site further.
From an organizational and go-to-market perspective, the announcement suggests, "CVM Solutions will be combined with Kroll Risk & Compliance." The high-level rationale for the deal is to "pair CVM Solution's supply chain management capabilities with Kroll Risk & Compliance's robust vendor screening services [to create] a business that is the first to offer a complete governance, risk and compliance platform integrated into a supply chain management software solution. The combined capability [will allow] clients to simultaneously drive supply-side efficiency while reducing fraud and ensuring compliance with the Foreign Corrupt Practices Act (FCPA) and UK Bribery Act."
We're looking forward to speaking with the Kroll/Altergrity leadership team who led the deal sometime today. We'll share more about our views on the acquisition and what it means for customers, prospects, competitors and partners after these discussions. But in the meantime, our gut reaction suggests this is a rather good thing for the market if Kroll can extend the reach of CVM Solutions into a broader customer base while also aspiring to a broader value proposition that links the profiling and credential management of both vendors and employees in a single, content-driven solution and platform. Now that would be unique, and potentially quite differentiated in the market.