Selectica Inc to Acquire b-pack: Initial Facts, Figures, Analysis

Businessman hand touching M & A on virtual screen - merger & acq

Earlier this morning, Selectica announced it was acquiring b-pack, a vendor specializing in purchase-to-pay (eProcurement + e-invoicing) technology with broader source-to-pay suite modules as well. Selectica had previously acquired Iasta, a sourcing specialist, which has since been fully integrated into Selectica from a commercial and management perspective (the technology is still independent).

Spend Matters analysis suggests b-pack had several clients of substantial size, but essentially all are French or European. They had relatively few North American-originated deals, and those were mainly small firms (despite the management of the organization moving to the US in recent years). As context on b-pack’s capabilities, their suite grew from early P2P origins, whereas their French competitor Ivalua started out with sourcing and later added P2P.

Acquisition Highlights

Here are some of the highlights from the press release announcing the transaction:

  • Selectica is acquiring b-pack “for approximately $12.5 million in cash and stock.”
  • “Selectica intends to pay approximately 90% of the purchase price in Selectica stock (calculated at a fixed price of $6.11 per share, resulting in 1,841,244 shares of common stock to be issued) and 10% in cash. In connection with the acquisition, Selectica will also grant options to purchase 700,000 shares of its common stock to the employees of b-pack.”
  • “b-pack's revenue for calendar 2014 is approximately $4 to $5 million, based upon its preliminary, unaudited financials. It has historically grown in the low double-digits overall, with its SaaS business having grown much faster. A majority of its revenue is currently generated from customers located in mainland Europe, while its U.S. market presence has been building in the last 3 years since opening their U.S. and corporate headquarters in Atlanta, Georgia.”
  • b-pack delivers solutions in “eProcurement, Purchase to Pay, Asset Management, Budget Management, Invoice Management, and Expense Management.” Spend Matters would add that b-pack also brings additional capability in the “upstream” areas as well including sourcing, contract management and supplier management.
  • “Founded in 2000, b-pack has its corporate headquarters in Atlanta, Georgia and operations in Aix-en-Provence near Marseille, France. Its executive team and staff members include approximately 50 people.”

Spend Matters Analysis: Selectica + b-pack

Spend Matters’ quick take on the combination is that Selectica has negotiated wisely in structuring an almost entirely pure stock deal to acquire a specialist provider which will give it additional suite capability and, specifically, a P2P solution set, which is one of the (functionally) stronger ones in the global market today. The valuation is lower than what might expect, but not overly surprising given b-pack’s comparatively slow pace of growth in North America.

To this point, b-pack’s Achilles heel in recent years was commercial execution – the transactional purchasing solution set itself compares favorably with other strong P2P providers such as Ariba, Coupa, Ivalua and Verian and provides particularly deep support for multi-ERP, cross-border and complex purchasing workflows and environments.

Fundamentally, b-pack’s founders brought more engineering than commercial savvy and essentially hit a wall in scaling the business from a customer acquisition standpoint. This is not a bad thing in fact (and actually bodes well for the new combination), as b-pack is primarily composed of a bunch of great technologists, whereas the management team from Selectica and Iasta are significantly stronger commercially.

Exploring the Solution Set and Footprint

Upon closing, the solution assets of the combined company will include:

  • Selectica for contract lifecycle management (CLM), a solution that is typically sold as a standalone solution. As an aside, we find it somewhat odd to see a core CLM asset serving as the roll-up vehicle for other providers in the market as CLM has tended to be a separate purchase outside of procurement suite capability, at least to date.
  • IASTA for sourcing, spend analysis and related enabling services. Ironically, although some may prefer the Iasta interface and approach, there is actually only limited capability in sourcing and supplier management that Iasta can deliver which cannot also be accomplished with b-pack (with additional enabling configuration and services). b-pack is also built on a more modern architecture than Iasta’s current solution.
  • b-pack offers decent sourcing (although not quite at the Iasta level), limited sourcing services and primarily specializes in delivering transactional P2P and related capabilities (e.g., catalog/item management, budgeting, limited inventory/asset management, etc.) They are not as deep in other source-to-pay suite areas as Iasta, and they also have contract management capability as well. b-pack has, however, emphasized P2P in its go-to-market approach rather than the broader "upstream" areas in which Iasta and Selectica compete.

A Curious Assortment of Technologies

With b-pack, Selectica will have a curious assortment of (often overlapping) technologies under one umbrella. But it faces a similar challenge as SciQuest does in integrating disparate acquired assets (SciQuest has taken many years to get the integration right on a single platform – and it is still an ongoing effort for them – to bring P2P, supplier management and sourcing together, not to mention CLM, which will gradually be released as part of its own integrated suite, starting in summer 2015). Selectica will need to pursue a similar integration strategy to maximize the value customers can get from the various assets.

Still, the move is a smart one for Selectica, as the acquisition price and terms (a low multiple and a 90% stock-based deal) was right, and competitors are increasingly delivering integrated suites. But what Selectica does with its assets collectively will arguably be more important than even bringing them together under one roof, especially in a highly competitive CLM world where incumbents are facing significant threats from new entrants such as Apttus which is starting to win more than its fair share of deals.

The Suite March – Not Complete Yet

The march towards suites is inevitable. In this journey, Selectica will ultimately need to combine a divergent set of inherited code bases (built on Delphi, Java, Ruby, .Net, PHP and Java) to create an integrated suite value proposition that can keep up with competitors by offering a single source of truth for supplier, item, catalog, user/individual and additional object records – with cascading workflow, permissions and data sets across the application set. Today, much as SciQuest looked a couple of years ago after a number of acquisitions – an integration challenge it has addressed through aggressive re-platforming – Selectica looks a bit like Frankenstein’s S2P suite monster architecturally. However, all of this can be addressed in time.

Spend Matters PRO will provide additional analysis on the transaction throughout the week, offering a closer look at b-pack's capabilities and what they bring to Selectica. In the meantime, we congratulate both parties on the transaction and see it as a strong net positive for customers and the overall market. At the very least, it will give the b-pack assets significantly more market exposure and a chance to compete with a strong sales and marketing organization behind it. Increased P2P competition will benefit the entire market.

Spend Matters PRO (Subscription Coverage):

Putting a P2P Player in Selectica’s Knapsack: Analyzing b-pack’s Procurement Technology Strengths

Exploring b-pack’s Marketing Challenges (Which Selectica is Likely to Fix)

 

 

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