M&A Content

I’ve decided to open up new Spend Matters Nexus columns and research briefs for everyone, not just subscribers, in the next few weeks, as we’re all certainly in a crisis period with the COVID-19 outbreak. To help make my coverage of investing and M&A more digestible, these dispatches will be shorter than usual (some will include frameworks and charts, others will not).

Having worked through two major shocks and downturns — the B2B.com implosion in 2001-02, the 2008-09 recession — I’m seeing both similarities and differences between those times and the coronavirus fallout today in the procurement, finance and supply chain technology worlds. But for different types of investing, asset classes and M&A activities, it’s clear the effects are already quite individualized.

Today, I’ll start with a summary perspective on what entrepreneurs, CEOs and business owners should expect for the next few months, based on transaction type. Please note: This column is not based on extensive primary research and survey data, but rather anecdotal evidence from what I’m seeing in the market, primarily as an advisor to sponsors and executive teams, but also as an angel investor and advisor myself.

Jason Busch is Managing Partner of Azul Partners’ Investor Advisory Group. He works with sponsors, CEOs and boards on data-driven due diligence, M&A and strategy. Jason is also the lead author of Spend Matters Nexus, a private newsletter and subscription service.

When should companies consider acquiring the latest procurement technology?

It seems like a simple question, but many businesses don’t always get to spend time considering the latest solutions, like in the area of supplier management — they’re more often compelled to do it when the market changes through a merger or acquisition, when their old technology and manual processes don’t cut it anymore, or when their suppliers and competitors outpace them by digitally transforming.

To learn more about when and how to start your digital transformation and continue to ensure it works for your business, we talked with NRG Energy about the evolution of its supplier management technology.

Spend Matters reported last week that DocuSign, which offers its eponymous e-signature product and a CLM solution (formerly SpringCM), had entered a $188 million all-cash agreement to purchase AI and contract analytics specialist Seal Software. The transaction brings Seal’s capabilities for enterprise-wide contract discovery and analysis firmly into the wheelhouse of a growing CLM presence for DocuSign (beyond digital signatures), as well as raises the competitive bar for CLM specialists, suite providers of many forms and even for “digital platforms.”

But what exactly is DocuSign’s current positioning in the CLM market, and what does acquiring Seal Software bring to the provider’s platform — the “DocuSign Agreement Cloud”?

This Spend Matters PRO brief provides an overview of DocuSign’s current set of capabilities and applicability to the buy-side CLM market, as well as a reprise of Seal Software’s core functionality and offerings. It also includes a comparative rundown of where both specialist CLM vendors and S2P suites are in their own AI development journeys, along with our projection for how DocuSign’s CLM strategy will play out in the broader CLM space and potentially as a disruptive offering in the amorphous digital platform market.

To cut to the chase: The CLM market and digital platform market may never be the same.

Spend Matters recently predicted that DocuSign, the electronic signature specialist, would buy the AI-assisted contract analytics firm Seal Software (another reason that subscribers to our PRO research are ahead of the market). As the prediction noted in January, “we can’t help but think that DocuSign will be actively looking for inorganic growth options in 2020, and Seal Software might be an obvious choice given its previous $15 million investment. DocuSign will also likely need to focus its attention to the buy-side to bring some parity to its SpringCM pickup.” And so the prediction came true. Perhaps faster than we might have guessed (although the transaction will not close until later this year).

In the coming weeks, Spend Matters Nexus will publish a series of briefs covering the transaction and what it means from a corporate strategy standpoint for DocuSign in regards to targeting CLM. Our approach will include exploring remaining gaps in buy-side CLM for DocuSign.

But let’s start today by focusing on DocuSign’s inventory of assets and what Seal brings to the table, specifically alongside SpringCM.

We’ll also tackle what Seal’s AI provides to DocuSign, and offer some initial analysis about the fallout for the competitive landscape in this brave new CLM-meets-AI-meets-“platform” world (spanning a range of providers like Icertis, Agiloft, Coupa, SAP Ariba, Conga, LegalSifter, Kira, Luminance, LawGeex, Zycus, etc.). An aside in this regard: Other buy-side providers who used Seal will now be likely looking elsewhere for CLM support for counterparty document shredding, analytics and repository creation (Seal’s partners include PwC, KPMG, E&Y, Deloitte, IBM, Coupa, SAP Ariba and many others).

Let’s dive in.

If you are new to CLM market, we recommend starting with the following research briefs:

* Seal Software: Vendor Snapshot — Part 1: Background and Solution Overview
* Part 2: Product Strengths and Weaknesses
* Part 3: Commentary and Summary Analysis
* For SolutionMap Insider subscribers, see the CLM Scoring Summary that shows where vendors rank and details their capabilities, including both pure play providers (e.g., Icertis, Agiloft, SirionLabs) and the S2P suite vendors. We’ll be adding Conga in our spring SolutionMap release in March — and then add Apttus and hopefully DocuSign (SpringCM) in the fall release. The public can see the SolutionMap CLM vendor rankings by persona here for free.
* Commercial Value Management: Making Contracts the Commercial Core of Enterprise Value (Part 1) [PRO]
* CVM (Part 2): Using Next-Generation Contract Systems to Integrate Operations, Financials, Risk and Technology [PRO]
* CVM (Part 3): Critical Commercial Use Cases to Align Extended CLM with the Enterprise [PRO]
* 2020 Predictions for Contract Management: Where the CLM Market Is Going This Year and This Decade [PRO]
* Free content: 2020 Predicaments in Contract Management: Poor Adoption, CLM Market Fragmentation and Limited Imagination
* Free content: Artificial Intelligence in Contract Management (4-part series)

DocuSign, the electronic signature specialist, will acquire AI-assisted contract analytics firm Seal Software for $188 million in cash, DocuSign announced today in a press release. […]

I’ve long been a fan of the spend analytics firm Sievo (going back to when my friend Fabrice Saporito was helping drive its commercialization as CEO in the formative years). But in a world where procurement and spend analytics technology ages fast, constant investment in R&D to drive solution improvement is key. You’ll need to read SolutionMap Insider (Analytics) and Spend Matters PRO (see our recent Vendor Snapshot of Sievo: Part 1, Part 2 and Part 3) to see how Sievo stacks up today, product wise.

But more important from where I sit today on the strategy and transaction side of the house (vs. the product one — I’ll leave that analysis entirely to the Spend Matters analyst team), is how McKinsey’s acquisition of Orpheus moves around the chess pieces on the partner and M&A board in terms of Sievo and its peers (Sievo, prior to the Orpheus acquisition, had a partnership with McKinsey). Does the deal help or hurt Sievo’s stock, so to speak?

In this two-part Nexus analysis, I’ll offer a perspective on this, starting with a look at Sievo (by the numbers including estimated revenue, customers, etc.) and what makes it attractive for partners and potential suitors.

This month, McKinsey announced it was acquiring Orpheus, a regional yet specialized (and highly capable) spend and procurement analysis provider based in Germany. For a primer on Orpheus and the acquisition, see our initial Nexus coverage. Long-time subscribers to Spend Matters PRO and SolutionMap Insider (analytics) know that analytics represents a set of capabilities that we pay very close attention to, owing to its importance in identifying broad-based procurement savings opportunities — and tracking results.

Indeed, when implemented correctly, spend and procurement analytics can drive savings and compliance across a range of areas, including sourcing, category management, procure-to-pay, contract compliance (including commodity and currency clauses). These solutions can also help procurement and finance organizations and consultancies to identify and manage working capital and payment opportunities to create a new balance sheet lever for “spend” that extends beyond how most companies think of spend management — a clever artifice that consultancies have leveraged in cost take-out engagements for decades.

This Spend Matters Nexus brief begins by sharing a back-of-the-napkin valuation and multiple estimate for the Orpheus-McKinsey transaction based on our M&A work in the sector (valuing spend analytics firms is typically not as easy as traditional SaaS). But this analysis focuses primarily on highlighting Orpheus’ strengths and weaknesses and what these will mean as McKinsey takes Orpheus global as part of its “Solutions” arsenal of capabilities outside of just consultancy. Not to mention enhancing the value levers — and speed with which it can pull them — in client studies.

As our analysis concludes in the final brief in this series, we will provide insight into how the transaction may impact the competitive landscape for spend and procurement analytics.

Spend Matters PRO and SolutionMap Insider subscribers (Analytics) can also learn more here:

Earlier today, McKinsey announced it was acquiring Orpheus, a German-based spend analytics company. The move represents a potentially interesting flanking maneuver for McKinsey in the ever more competitive and converging world of procurement and operations consulting and managed services.

It is said that the Big 5 (e.g., Deloitte, which has its own analytics applications) has always had the ear of the CFO, owing to its accounting roots. And Accenture (which has various in-house technologies too) has always possessed a similar relationship with technology leadership (and often process leadership as well). But in contrast, McKinsey has been able to sometimes come out on top of both types of firms by selling to the board or C-level.

In reality, these are just stereotypes, as the level of relationship that a consultancy has in selling is always unique to the situation, the seniority of its partners and other circumstances. But no doubt the convergence of solutions — professional services, analytics, market intelligence, packaged SasS applications, etc. — is not only helping bifurcate the consultancy market in procurement and supply chain, but has led to new types of hybrid firms such as GEP and Insight Sourcing Group to dramatically break out from the mold too.

In a series of research briefs on Spend Matters Nexus covering the addition of Orpheus to McKinsey’s solution arsenal, we will explore these topics from multiple angles, including a competitive landscape analysis of “converged” solutions.

But let us start today with what Orpheus does (and does not) do along with some basic revenue/customer facts and figures, as well as some initial hypotheses on what Orpheus will bring to McKinsey beyond the obvious of core, in-house spend analytics capabilities (displacing Sievo, most likely, as one of the firms “go-to” partner solutions).

This first analysis will be a bit technical in nature, but we believe that in the analytics sector such analysis is important to put the acquisition in context from a broader strategy, corporate development and M&A landscape perspective. So stick with it if you can. We promise on the back end it will be worth it.

Spend Matters PRO and SolutionMap Insider subscribers (Analytics) can also learn more here:

This week, Omnia Partners announced it was acquiring InsightGPO, the group purchasing organization arm of Insight Sourcing Group. According to the announcement, the transaction closed on Dec. 31, 2019. Prior to the definitive agreement, “InsightGPO was one of five divisions of Insight Sourcing Group,” which provided its “clients with highly targeted offerings for office supplies, auto rental, MRO and office equipment,” according to the press release announcing the deal.

Yesterday, I had the chance to speak to Tom Beaty, CEO, Insight Sourcing Group, and M. Todd Abner, President and CEO of Omnia Partners, to learn more about the transaction.

This Spend Matters Nexus brief shares a bit of what was learned (Omnia facts, figures) along with our own transaction analysis and a back-of-the-napkin valuation and relative multiples in the GPO market. It also traces the history of Omnia and provides a perspective on the GPO today (at an investor level) and future scenarios. We will follow up this Nexus M&A analysis with a detailed vendor snapshot/overview of Omnia on Spend Matters PRO this quarter, including a full SWOT, customer recommendations, etc.

For those interested in learning the basics of GPOs and how to use them as part of a category management portfolio strategy, we suggest you start with our past coverage and a chart showing the primary GPO market segments:

● An Introduction to Group Purchasing Organizations (GPOs)
● Group Purchasing Organizations: Supplier Perspectives and the Evolving GPO Landscape
● All We Are “Saved” — Give Purchasing Consortia (Including GPOs) a Chance
● The Healthcare Group Purchasing Organization (GPO) Landscape: Background, History and Introduction



Jason Busch is Managing Partner of Azul Partners’ Investor Advisory Group. He works with sponsors, CEOs and boards on data-driven due diligence, M&A and strategy. Jason is also the lead author of Spend Matters Nexus, a private newsletter and subscription service that publishes 50+ times per year. Spend Matters and Spend Matters Nexus are owned by Azul Partners. His investment disclosures and other activities can be found on LinkedIn.

M&A and investor interest in the procurement technology sector is at an all-time high. Of course it also helps that there are more than 1,000 providers in the procurement solutions market (software, consulting, outsourcing, managed services, market intelligence, etc.) and adjacent markets than ever before — and new start-ups popping up on what feels like a weekly basis.

In the first installment of this series, we covered the first three sector M&A and investments trends that we’re paying attention to in 2020. These are competition growing between strategic and financial buyers; ERP and big tech getting more active in the sector; and buyers/investors expanding their definition of procurement technology.

Today, we turn our attention to our next two trends. These are:

Trend 4: Convergence of sourcing, category and market intelligence solutions: blurring the lines (i.e., application/technology, services, content/intelligence, etc.)

Trend 5: Payments, accounts payable and procurement intersections accelerate

M&A and investment activity in the procurement sector has started 2020 with a bang based on Coupa’s acquisition of Yapta and CVC’s $200 million investment in EcoVadis (which came on the heels of Workday’s buyout of Scout RFP in November). Spend Matters actively tracks over 600 procurement technology providers, of which more than 300 are featured and segmented by capability (suites and modules) in a recent PRO research brief and graphic (see below).

But we believe the actual number of providers — if we consider peripheral areas focused on category and market intelligence, analytics, services procurement and adjacent finance, supply chain, risk and supplier-related GRC applications that are still of interest to procurement organizations as the primary economic buyer — brings the list to over 1,000 different providers.

Many of these providers will raise capital or get acquired in 2020.

But what trends are driving acquisition and investor interest in the sector, and what types of transactions should we look for?

This Spend Matters Nexus brief provides an introductory analysis of sector M&A and investment predictions for 2020, exploring the first three of 10 trends we’re starting to spot:
* Trend 1: Competition grows between strategic and financial buyers (and those that fall somewhere in the middle).
* Trend 2: ERP and big tech get more active in the sector.
* Trend 3: Buyers and investors expand their definition of procurement technology.

Subsequent briefs in the series will cover additional trends as well flesh out some of the more important strategic and financial buyer (and investor) priorities on a more granular basis. Let’s get started!

This week, Coupa, a provider of business spend management solutions, announced its acquisition of Yapta, a solution provider that enables businesses to automatically monitor and re-book air and hotel reservations when prices drop. Yapta also provides category specific spend analytics and intelligence. The terms of the deal were not disclosed.

While likely not a large market shakeup, the acquisition of Yapta still catapults Coupa from one of many brands competing against “the big T&E kahuna,” SAP Concur, in the enterprise and SMB space to one of the few specialized technology providers that can tell a broader story that includes truly non-invasive travel savings and category management.

Travel is a very significant category for most companies. According to the 2018 GBTA BTI Outlook — Annual Global Report & Forecast report, travel spending reached $1.33 trillion in 2017, up 5.8% over 2016 levels. The report also forecasted that business travel spend would expand to $1.7 trillion by 2022.

Business travel spend as a percent of total spend varies by industry and company. However, available market data suggests that aggregate global business travel spend is approximately 2-3X the aggregate global spend on temporary staffing services. In other words: Too significant for procurement to ignore.

Spend Matters spoke to Yapta CEO James Filsinger and Coupa’s Donna Wilczek, senior vice president of product strategy and innovation, about the acquisition. Coupa told Spend Matters the Yapta solution will augment and integrate (and ultimately be unified) with Coupa’s business spend management (BSM) platform with offerings in both its Travel & Expense and Spend Analysis segments. This Spend Matters PRO analysis provides an introduction to Yapta and offers an analysis of the combination.