Earlier this morning, SciQuest announced an agreement to acquire Chicago-based spend analysis provider Spend Radar. According to the press release, SciQuest has "entered into a definitive agreement to acquire Spend Radar LLC for about $8 million in cash and $2 million of stock. The company may also make additional payments of up to $7.5 million consisting of cash and stock if Spend Radar achieves certain revenue performance targets over the next 5 quarters. The transaction is expected to be complete on or about October 1, 2012."
We will share additional information as it becomes available and after a briefing from SciQuest and Spend Radar in the coming days. Spend Matters' initial analysis suggests the acquisition will immediately catapult SciQuest to the forefront of the spend analysis classification and analytics market. Even though Spend Radar was a relatively young organization that had expanded quickly through organic growth, its founder, Brian Daniels, had spent significant time at other providers earlier in his career, applying a decade of lessons learned to build a better classification mousetrap as an initial strategy for his new firm.
Later, Spend Radar layered on an analytics capability using QlikTech's technology, which has also formed the basis of several other spend analytics front-ends in recent years. Key to Spend Radar's commercial growth was the eventual hiring of Cindy Barlow (Brian's wife), a successful high-tech sales executive, who greatly accelerated the commercial traction of the firm.
With Spend Radar, SciQuest will gain access to a team well versed in how to provide both the spend analysis basics as well as applying spend analysis to more advanced use cases. For example, Spend Radar has put together a number of cubes and front-ends showing transportation/logistics spend data in the context of department of transportation (DOT) safety records. They've also been able to leverage price indexes as part of spend analysis cubes on a much more granular contract and commodity basis than some competitors who rely on static BLS refreshes that do not tie directly to price escalation/de-escalation clauses.
We suspect that SciQuest will be able to fully leverage the Spend Radar asset in both its existing verticals (life sciences, healthcare, public sector, etc.) and also use it to accelerate an entrance into new markets. It will also set up a head-to-head competition with BravoSolution for spend analysis and broader solution delivery to enable IDNs (large hospital networks) and group purchasing organizations (GPOs) in the healthcare sector.
As spend analysis tends to stand apart from other source-to-pay suite elements, there will not be a need for close code level integration of products such as the type of .Net to Java machinations that SciQuest will eventually need to go through with AECSoft and Upside Software to enable full platform integration (two other acquisitions it has made in the sector). Still, the acquisition suggests that SciQuest will continue to make aggressive moves as it builds a sector roll-up of various assets. But whether it ultimately looks more like a procurement Infor, with a diverse set of loosely coupled assets, a single platform provider, or something in between, remains to be seen.
We will continue to cover this acquisition announcement on Spend Matters PRO later today, including key customer, competitor and partner takeaways. It is important to note that much of Spend Radar's revenue came from partners including consultants and marketplaces who used it for initial spend snapshots and for ongoing visibility into customer spend for longer-term projects and transformations. Maintaining this revenue will be key for SciQuest.