Proactis Acquires Perfect Commerce: Something is Fishy (in a Good Way)

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U.K.-based spend management and e-procurement solution provider Proactis announced Friday it’s snapping up Perfect Commerce, a U.S.-based source-to-pay (S2P) provider.

Assuming shareholder approval, the new company, which will be called Proactis, will be one of the largest global cloud-based spend management companies, according to the announcement.

The $132.5 million deal (in aggregate consideration) roughly doubles Proactis’ revenue. Proactis is running at roughly £25 million in its current fiscal year, while Perfect Commerce exceeds a $35 million annual run rate, making the deal a reverse takeover, of sorts.

Perfect’s CEO Hampton (“Hamp”) Wall is taking the helm, while long-time Proactis CEO Rod Jones will be stepping down (as he announced a few months back) and handing over the keys of the portfolio. Tim Sykes, Proactis’ CFO, will remain in that role.

The merger is the latest move in an ongoing acquisition-based global growth strategy for Proactis, which has acquired Intesource, EGS, Intelligent Capture, Due North and Millstream within the past three years. Perfect Commerce has previously acquired Hubwoo, Commerce One and eScout. You can see Spend Matters coverage on Proactis’ and Perfect Commerce’s previous acquisitions below:

Looked at from the Perfect perspective, the merger is a way of reversing into an already publically traded entity, listed on the London AIM market, and gaining — at some point based on conditions of the transaction — liquidity for its shareholders.

We’ll have more details in a forthcoming Spend Matters PRO analysis, but at first glance, the acquisition continues to build on Proactis’ non-organic growth strategy. It is worth noting that Proactis is one of the few firms in this sector that has shown consistent profitable growth in recent years; combining the two elements of that phrase is something many have not pulled off.

Obviously the market is highly dynamic right now, and growth is king. SAP bought Ariba (now SAP Ariba), Concur and Fieldglass. Coupa went public and just bought Trade Extensions and Spend360. BravoSolution, Tradeshift and Basware have also been acquiring firms in their quest for source-to-pay suite leadership, and Ivalua and Jaggaer have received major financial investments to bolster their growth plans.

The acquisition adds roughly 150 customers to Proactis’ more than 850 buy-side customer base. It also add 1.3 million users to its 2 million users and nearly doubles its 1 million supplier connections. The combined entity will see more than 450 employees serving well over 100 countries, predominantly focused on North America and Europe/U.K. We believe there will be some rationalization — around back-office and data centres, for instance — but the geographic and customer profile is complimentary with limited overlap, so no major job losses are expected — indeed, that fit provides some obvious revenue opportunities.

Our “back of the envelope” analysis suggests that organic growth for the combined entity will be critical in a market that continues to see double-digit SaaS growth overall. A shark must eat and move to grow and survive.

But Proactis isn’t a shark — it’s a school of fish. And while piranhas hunt well as cohesive whole, software acquisitions are different. Each fish must compete on its own against bigger competitors, and the sum of the parts is by no means greater than the whole.

There are some benefits, such as the “mutual fund effect,” to minimize risk of each individual acquired company (and show good overall financial SaaS revenues). There are also the benefits in sales/marketing synergies to cross-sell more products into various geographies.

Customers, however, aren’t buying mutual funds, and they want their individual supplier to serve them specifically and personally over the long term. As such, product synergy is a question mark here. Combining (or at least incrementally harmonizing and augmenting) the supplier networks holds some promise but may take many years to execute.

So, is Proactis becoming the Infor of the procurement tech market? That’s not necessarily a bad thing, but Infor has a playbook that’s taking it beyond an ERP graveyard and becoming an industry-focused solution provider built on a foundational technology platform and digital business network.

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