Ariba! Ariba! The market takes a liking to supply-chain technology…

So why didn't I buy Ariba shares?  Why DID I buy Rok and Southern Cross ? Generally my share picking has been appalling, so I have studiously avoided investing in any of the procurement related firms that we talk about here. Many aren't public anyway, but some are - Ariba being the biggest (not counting the ERP giants), but others include Basware in Finland, Hubwoo in France and @UK and Proactis on the UK's secondary markets.

Jason has written an excellent piece this week here at Spend Matters US on the Ariba valuation which has rocketed in  the last few months, and what it means for the whole sector. Ariba is now trading at 8 times revenue, which is pretty much back to the millennium dot.com bubble days.

But he is unambiguously positive about this - the knock on effects he believes are good for both start ups and existing players in the procurement and supply chain technology space. Capital is easier to find for new firms, more established will be looking to consolidate, and Jason believes that ultimately public ownership drives more responsiveness to customers and 'a new level of transparency' (although I think some might take issue with that contention!)

I wonder if any of our privately owned European firms in this sector might be thinking of flotation when they look at Ariba's valuation now? Many are perhaps not quite big enough to justify it, but there's a few who might just be tempted...

And perhaps I better start an M&A 'boutique' advisory firm....

Voices (2)

  1. Peter Smith:

    Alan
    Good point and regular readers will know that my stock-tipping is of the “avoid whatever Peter is recommending” variety – Rok and Southern Cross being two of my recent ‘successes’… my latest winner is WIncanton, don’t understand why that has proved to be such a dog (in share price terms) as well, thought they were a good company..
    I do think however that there is something around a new era for procurement technology , finally breaking through into mass acceptance. But you’re spot in in that there will be big winners and big losers, and I certainly won’t be trying to pick them! (And I don’t hold any stock in tech firms – Tesco yes, Ariba no).

  2. Alan Strawberry:

    Be careful not to generalise too much… Ariba’s stock may have rocketed but if you had bought Proactis stock on flotation almost exactly 5 years ago, you still wouldn’t have broken even. (I can’t even bring myself to mention @UK’s stock performance!) Haven’t tracked Basware but I suspect their progress has been a little more pedestrian than Ariba’s too. I don’t think it’s this market that is the reason for the sky rocket.. reading what the financial analysts are excited about its the Ariba business model that excites and the company’s strength of management which reassures. Any company with these fundamental building blocks in a growth market is sure to perform well.

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