Quadrem and Ariba — Additional Deal Considerations and Details

Earlier today, Ariba announced it was acquiring Quadrem in a move focused largely on consolidation (rather than innovation or product enhancements) in the P2P area. According to its SEC filing, Ariba expects the acquisition to double network revenues to $110 million, increase spend on the network to $155 billion, and have 325,000 total suppliers. Our quick take on the entire affair is this is a rather boring (but financially astute) plug and chug network financial play on Ariba's part.

There are a range of other elements of the deal we should consider as well that we'll examine in a forthcoming post. But for now, here are a few additional considerations that those examining the news should be aware of based on Ariba's own statements:

  • "Ariba has also agreed to pay $10.25 million to modify and terminate aspects of a commercial arrangement previously entered into by Quadrem."
  • "For the twelve months ended December 31, 2009, Quadrem recorded revenue of approximately $58 million of which approximately $45 million was recurring subscription revenue and the balance was related services"
  • "Ariba expects Quadrem to close calendar year 2010 with approximately 15- 20% revenue growth year-over-year. Quadrem is modestly profitable and Ariba expects this transaction to be accretive on a non-GAAP basis in the 12 months following the close. After the first 12 months and in general, Ariba expects to run this business at the same operating profitability level as the current network business."
  • "Quadrem has good reach into a number of SAP accounts ... and [have had] success capturing and consolidating spend coming out of SAP systems," according to Ariba
  • "80% of Quadrem's revenue is coming from suppliers"
  • Quadrem's business is heavily weighted towards Latin America, EMEA and Asia Pacific (versus North America); Ariba has weaker penetration in these markets from a volume perspective

Check out our further coverage, details and analysis here.

Jason Busch

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