Tradeshift announced Wednesday it had acquired IBX Business Network from Capgemini. Spend Matters believes the transaction is, by a significant margin, Tradeshift’s most important acquisition to date. And from the “seller” side of the deal, Capgemini suggests that the transaction represents, from a corporate development perspective, more than just the divestiture of a business unit.
“Tradeshift and Capgemini have entered into an agreement under which Tradeshift will acquire Capgemini’s IBX Business Network,” according to the announcement. “The deal forms the foundation of a new long-term partnership between Capgemini and Tradeshift focusing on source-to-pay and supplier platform business.”
Want to learn more about the P2P landscape and where Tradeshift and IBX sit in the broader market context? Download the FREE Spend Matters 2017 report E-Procurement and Invoice-to-Pay (P2P) Landscape Definition and Overview.
The deal is expected to close in April 2017. Our quick (financial) commentary on the combination and transaction includes the following:
- While valuation, revenue and related metrics were not disclosed in the announcement, Spend Matters estimates that IBX was a similar size (potentially larger) organization for the trailing calendar year on a revenue basis than Tradeshift, although Tradeshift appears to be growing materially faster. The combined revenue of the two firms is still less than it would likely take to go public in a similar manner to a Coupa (unlike the situation with IQNavigator and Beeline, another recent transaction).
- Assuming a 20%–30% growth rate at IBX, typical transaction multiples based on trailing year revenues that we would assign to such a source-to-pay (S2P) and network business in our own advisory work would typically be in the 4X–6X range. We suspect this is the probable range Tradeshift might have paid for IBX.
- Given the announced broader partnership with Capgemini (and available cash), we suspect that the deal was done for a combination of cash and stock.
In the announcement, Tradeshift notes that the “the combination of Tradeshift and IBX will create the world’s largest business commerce platform connecting nearly 1.5 million businesses and more than 500 global enterprise customers that have access to the largest supply-chain app ecosystem.”
Customer and Product Analysis
From a customer count perspective, Spend Matters previously reported in 2016 that “350 customers use the IBX (source-to-pay) solution to buy from more than 550,000 suppliers (on the network), across more than 140 countries and to manage more than $27 billion in annual spend.” Hence, the IBX customer “additions” to the Tradeshift base are critical, as they cement the organization from a critical mass perspective and will bring just over two-thirds of the overall customer base to the combined organization.
But what does IBX offer today, and where does it overlap with Tradeshift?
As we previously reported in our PRO research covering IBX (see: Capgemini IBX Business Network: Vendor Snapshot (Part 1) — Integrated S2P With Head-Spend and Tail-Spend in One and Capgemini IBX Business Network: Vendor Snapshot (Part 2) — Strengths, Weaknesses and Summary Recommendations):
“IBX delivers its S2P solution integrated with a global supplier network, where suppliers can self-register, manage their customer interactions through a portal with a single integrated view, and even manage their invoices that originate outside of the IBX platform. Currently 350 customers use the IBX S2Pd solution to buy from more than 550,000 suppliers (on the network), across more than 140 countries and to manage more than $27 billion in annual spend.”
From a functional perspective, IBX brings the following modular solutions to Tradeshift:
- Spend analysis (delivered via partner capability, as of the time of our 2016 review of the IBX suite)
- IBX Business Network (the core e-procurement solution within IBX)
- Spot buy (a module that drives the requisitioning process for non-catalog products or services)
- Procurement intelligence (advanced suite reporting built on Microsoft's Strategy Companion)
- Supplier portal with invoice management
Like Tradeshift, which has made multiple acquisitions to date, IBX itself is an amalgam of different vendors — perhaps even more so than Tradeshift, which continues to develop and integrate solutions as part of its core platform-as-a-service (PaaS) strategy. As we previously noted in our coverage of the provider under the Capgemini umbrella:
Buried within this services behemoth is a specialized procurement division, the IBX Business Network, created by IBX Group, in Stockholm, Sweden, and acquired by Capgemini in 2010. Since IBX's own acquisitions of Trimondo GmBH and Portum AG in 2005 and 2006, the provider has steadily increased its capabilities, including bringing one of the richest source-to-pay (S2P) platform capabilities that is pre-integrated with a supplier network. While particularly strong in the Nordics, the IBX division of Capgemini has expanded throughout Europe and North America, as well.
Product Strategy & Rationalization Speculation
Spend Matters will be speaking with Tradeshift later today and will provide additional information and analysis on the transaction later this week. We are particularly keen to understand how Tradeshift plans to rationalize the proven e-procurement capability within IBX with what it is in the early stages of rolling out to customers in 2017.
Short term, following the close of the transaction, our best guess is that the IBX Business Network (e-procurement) becomes an “app” on Tradeshift and the preferred e-procurement solution the combined organization will sell — before replatforming occurs. The invoice-to-pay and supplier portal component of IBX (functionally superior in Tradeshift) would seem a natural transition to Tradeshift over time at the pace which IBX customers want to migrate.
No P2P Hamlet Here
As a final note, Tradeshift and Capgemini suggest in the announcement that they see a cultural fit in the combination of the firms. Perhaps this is no surprise (beyond the company and technical synergies) given the Nordic roots of both providers, although many people make the assumption Nordic cultures are the same. But they are most certainly not, as any Dane or Swede will tell you. (Tradeshift started in Denmark and IBX is headquartered in Sweden.)
Nordic stereotypes aside, our own analysis suggests the teams will likely complement each other well. The IBX team provides gray hair, a strong, proven track record of cohesion, a conservative voice of reason and knowledge across the S2P continuum. The Tradeshift team brings exceptional energy, spunk, vision, paradox and rapid-fire Twitter skills — a modern P2P Hamlet, if you will.
Alas, we think most observers would suggest the ending has a much higher probability to be more comedic (in a positive sense) now that both Nordic P2P firms have joined forces. And, of course, the specter of “winter” coming from the Nordic frontier across the frozen archipelago in the form of both Basware and OpusCapita getting more aggressive in the global P2P, supplier network, trade financing and platform market is likely to keep both the Danes and the Swedes on their toes (not to mention SAP Ariba, Coupa, Oracle, Taulia, Jaggaer and many other P2P and trade financing providers).
But perhaps Tradeshift (and its future IBX brethren) has nothing to worry about in regard to this last point. Kalsarikännit, which Finland actually puts on an official tourism website, does not translate to Danish or Swedish (or English for that matter).
Want to learn more about the P2P landscape and where Tradeshift and IBX sit in the broader market context? Download the Spend Matters 2017 report E-Procurement and Invoice-to-Pay (P2P) Landscape Definition and Overview.