Beeline and New Mountain Capital: A Conversation With Doug Leeby (Part 1)

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Beeline announced Thursday it had been acquired by New Mountain Capital, a private equity firm that seeks to “acquire the highest quality leaders in carefully selected ‘defensive growth’ industries, and then to build those businesses.” New Mountain acquired Beeline from majority shareholder GTCR, which acquired IQNavigator in 2008, later acquired Beeline in December 2016 and oversaw the successful merger of the Beeline and IQN into a single solution provider, dubbed Beeline.

The acquisition, which Beeline and New Mountain describe as a partnership, represents a key development within the traditional contingent workforce management technology (i.e, VMS) solution segment. To get a clearer perspective, we sat down with CEO Doug Leeby for a wide-ranging conversation on what the deal means for Beeline, New Mountain’s approach managing its portfolio companies and how the acquisition could ripple through the broader contingent workforce and services (CW/S) technology sector.

Andrew Karpie: First of all, Doug, congratulations on the transaction. Maybe we could start with the transaction itself and what it means for Beeline, now and going forward?

Doug Leeby: Structurally, I think of this as a “lift and shift,” from GTCR to New Mountain Capital — the difference being that New Mountain Capital obviously is going be growth-oriented, and they're going to have a much longer-term perspective. Whereas it's no secret that those guys in Chicago [GTCR] were putting us together to make something great and sign it off, New Mountain Capital is highly growth-oriented. Historically, they do a great job with their investments and acquisitions, and that’s what they’re looking for too.

So for Beeline, it's business as usual. Everybody is staying in place. No synergy exercises like we experienced a year and a half ago, so all very positive.

AK: Could you elaborate on why Beeline ended up going in a private equity direction, as opposed to a strategic acquisition by another industry or technology player?

DL: For me, that would only be speculation. So let me walk you through the process a bit.

We went to market in January. It was a very competitive process. We met with scores and scores of great firms. We had a lot of excitement about many of them. Some of the themes I picked up were that there is a lot of money in the market, and that HR tech, human capital management, is a very hot area, primarily fueled by the growth that our sector has enjoyed and continues to enjoy.

I think what differentiated us in the eyes of New Mountain Capital was their acquisition and experience with Alexander Mann Solutions. So it wasn’t difficult for them to understand the space. These guys, having lived it, understood the growth as well as the potential that still lies ahead — especially in terms of self-sourcing. Because when you think about Alexander Mann Solutions' model, they basically do recruitment process outsourcing (RPO), predominantly over in the U.K. So our self-sourcing,  direct sourcing, thesis just made a ton of sense to them. They really understand the future of work, and it was easy for them to look at the potential and value us accordingly.

More specifically,  they have been in our space for a while,  but they also appreciated our market position. From the large global VMS perspective, with us and SAP Fieldglass, that's also a  good place to be from their perspective. We're enjoying rapid growth,  both from adding new logos as well as expansion. So the momentum helped tremendously. And then the other thing that New Mountain Capital honed in on was innovation and our approach to growth.

AK: So GTCR did its job, and Beeline found what appears to be a very solid match. Maybe you could talk a bit more about the journey from Beeline’s perspective?

DL: When we merged the two companies in December 2016 under GTCR, we were already pretty clear that if we put the No. 2 and No. 3 players together, you have to come out with a better end-product. So we made commitments to clients and we achieved some quick wins in short order.

For us it's about credibility, but you also have to make the hard moves, as we did. There was a painful six months where we had to walk a lot of our friends out the door, because there was a fair degree of overlap. That takes a cultural hit, as you can appreciate. But what helps culture is winning. 2017 was one of our better years, and the two teams came together extremely well.

It wasn't just a marketing slogan to say "Better Together." I think we proved that we were better together. The organization gained a lot of faith and confidence, and the momentum was extremely strong.

But in the technology sector, you can't rest on your laurels and become complacent. You’ve got to keep going hard. Now we have an opportunity with a firm that has a longer-term perspective and is very desirous of enabling us to invest. Our financials are very strong, so we have a great opportunity to self-fund some our endeavors. New Mountain Capital is also an acquisitive organization, and they are excited about the space and effectuating some of our vision through acquisitions.

AK: From what I’ve read, it seems that New Mountain Capital is an investment firm that is not just a passive investor. That is, it gets involved--supportively, of course--with with its portfolio companies. How do you think the they may get involved with their Beeline investment?

DL: I don't know I if have enough experience to properly answer that question, but one of the things I like about these guys is they are very interested in finding the right board. Clearly they are going to take some seats, but they are all about perpetuating our growth and finding [board] members in the community that can help us, as well.

They've also committed that, aside from board meetings, there will be strategy meetings that happen with greater frequency, because they're very motivated to start looking at self-funding investments and/or acquisitions. So in short order, they are going to be working with us to prioritize and then set up some game plans for that. We’ve shared a host of ideas with them that they they seem to be pretty excited about.

To learn more about how Beeline is positioning itself in a changing CW/S technology sector and what its biggest opportunities are, stay tuned for Part 2 of this exclusive interview.

This interview has been edited and condensed.

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