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
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 activein 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.
Coupa announced today that it is buying Yapta, a website that monitors airline and hotel prices in real time and rebooks at the lowest price. The addition to Coupa’s business spend management suite of offerings bolsters its travel and expense capabilities, according to the announcement.
In July, Spend Matters Founder Jason Busch launched Spend Matters Nexus — his focus on the M&A and business side of the procurement technology market. Here’s how he describes it:
“The Nexus membership program is designed for investors/acquirers (private equity, corporate development, etc.) and solution provider CEOs in the procurement and finance technology/solution ecosystem. Membership offers a new strategic lens to the solution areas covered on Spend Matters.
"Nexus was borne out of an increased demand for research subscriptions, due diligence and strategy support with our private equity clients in late 2018 (which has picked up exponentially this year). But recently, our team realized there was a flip side to working with technology acquirers — providing relevant market intelligence and fresh, data-driven analysis for solution provider CEOs, boards and leadership teams.”
And here is a countdown of the top 5 most-viewed Nexus stories of 2019:
In this Spend Matters Nexus brief, we’ll look at our final tip (No. 20!) for sellers to get the most from a liquidity event when raising a large growth capital round or selling to private equity or strategic buyers. This tip, defining the “post-close” plan, may seem like a simple follow-on effort that you can worry about after the ink is dry on a transaction.
But displaying leadership when it comes to the post-close plan before a deal is complete will both help your organization accelerate out of the gate after it is acquired or merged and will burnish your reputation with your new owners. As important, showing the ability to develop a realistic post-close plan with key checkpoints and milestones at specific intervals (like 90 days, 180 days, etc.) is a strong leading indicator that the implementation of such an effort will be a success — even if its components and details shift post transaction.
M&A can sometimes be a threat to customer value. Even in the best situations, acquisitions can introduce uncertainty for customers in terms of pricing, support and related areas. And in the worst, M&A can put actual and implied contractual terms and supplier obligations (if not expectations) at risk come renewal time — and even threaten the underlying reasons for why a technology was selected in the first place. For customers, skepticism in vendor M&A is always better than the alternative. But we look at the combination of Medius and Wax Digital from a slightly different lens, as the combination under the backing of a growth-oriented private equity owner joins together two organizations that could, for a variety of reasons, bring benefits to customers with less potential for downside risk than many M&A transactions.
Regardless, the informed customer — the one that has every intent on getting the most out of their technology supplier after it is acquired or merged with another entity — will always invest the time to understand a combination from an objective lens, how it may benefit them above and beyond the current commercial relationship that is in place and their true BATNA (best alternative to negotiated agreement) for all current and potential engagement elements. Such insight, even if a transaction like Medius-Wax appears to benefit them on the surface, will always pay dividends, and will put procurement and finance buyers in the driver’s seat to make the best decisions for them.
This Spend Matters PRO analysis provides recommendations for customers of Wax Digital and Medius. If you are new to our coverage of the transaction, we recommend starting first with our free site coverage: here and here. Spend Matters Nexus subscribers (those within the M&A ecosystem including sponsors, CEOs, boards and corporate development leaders) can also read our deeper analysis of the combination here:
This Spend Matters Nexus research brief explores the potential competitive impact of the Medius and Wax Digital combination on the procurement and ERP vendor landscape. It also explores the strategies that some providers within these groups are already pursuing (or may pursue) in response to customer requirements, competitive pressures and the desire to expand the overall total addressable market for integrated procurement and finance solutions.
Procurement technology vendors and ERPs targeting procurement compete in a catch-all market segment that can make an area like CRM or human capital management (HCM) seem simple by comparison. From sourcing to contract management to supplier management (and all of its sub-disciplines) to e-procurement to analytics (and beyond) for all types of spend — indirect, direct, services, tail, etc. — the various components of procurement technology are as diverse as the specialist, suite and ERP vendors targeting the market.
Vendors covered in this analysis include Corcentric, Coupa, Infor, Jaggaer, Microsoft, Epicor, GEP, Ivalua, Netsuite (Oracle), Oracle, Proactis, Sage, Synertrade, SAP, Unit4 and Zycus.
Jason Busch serves as Managing Director of Spend Matters Nexus, a research and advisory group that works with sponsors, CEOs and boards on due diligence, M&A strategy and product strategy. Spend Matters and Spend Matters Nexus are owned by Azul Partners. Disclosure: Azul Partners served as an adviser to Marlin Equity in the Wax-Medius transaction.
Let’s take a closer look at the Premier Inc. acquisition of Medpricer announced recently. For this Spend Matters PRO brief, we talked with leaders of both firms to get further insight into the acquisition and what it means. We also offer some reasons why this development is significant for procurement practitioners. Premier Inc., a $1.2 billion diversified healthcare improvement company, has acquired Medpricer, an innovative solution provider focused on the management of the enormous and largely unmanaged “purchased services” category of spend within hospitals and healthcare systems.
Premier bought Medpricer for $35 million and expects the acquisition to be modestly accretive in 2020. The company has stated that Medpricer will continue to operate as an independent unit and brand, and will remain GPO neutral, while augmenting Premier’s own technology and analytics capabilities. Medpricer’s CEO will continue to lead the business as part of Premier’s Supply Chain Services segment.
Headquartered in Charlotte, North Carolina, Premier describes itself as “a leading healthcare improvement company, uniting an alliance of more than 4,000 U.S. hospitals and health systems and approximately 175,000 other providers and organizations to transform healthcare.” The company leverages integrated data and analytics, collaboratives, supply chain solutions, and consulting and other services to promote "better care and outcomes at a lower cost.” It also collaborates with members “to co-develop long-term innovations that reinvent and improve the way care is delivered to patients nationwide.”
“Medpricer’s spend management platform,” the company has noted, “uses artificial intelligence to validate, compare and onboard purchased services suppliers; track and measure spend by category, supplier and facility; benchmark contracts terms to ensure competitive rates; set and manage specific savings targets; and manage contract compliance.” It was also noted that purchased services — which “often fall outside the scope of national group purchasing contracts” — are estimated to “account for up to 30% of a typical healthcare provider’s non-labor expenses, and represent a total addressable acute care market of approximately $160 billion.”
Premier told Spend Matters that “Medpricer is an important component of its evolving cost management strategy and is an integral next step in our continuing expansion toward a fully integrated purchased services platform.” Premier also noted that it has the “ability to fund and materially accelerate the development of Medpricer’s offerings.”
Spend Matters recently posed some questions to Premier. We received written answers and also had an opportunity to talk with Premier’s Senior Vice President of Supply Chain, David Hargraves, and Medpricer’s President and CEO, Chris Gormley.
This Spend Matters Nexus research brief explores the potential competitive impact of the Medius and Wax Digital combination on the AP automation and invoice-to-pay markets. It also explores the strategies that some providers within these groups are already pursuing (or may pursue) in response to customer requirements, competitive pressures and the desire to expand the overall total addressable market, or TAM, for the AP automation sector and related opportunities.
AP automation and invoice-to-pay vendors compete in a market that is growing and changing by the day. This market counts AP specialists such as Accrualify, AvidXChange, Beanworks, SAP Concur, Symbeo, MineralTree, Medius, Yooz and dozens of others, as well as broader procure-to-pay providers such as Basware, Corcentric, Coupa, Oracle, SAP Ariba and Tradeshift. I previously described this market as “hot, hot, hot.” And I stand by that hyperbole.
Some of these providers have chosen to focus on the core of AP workflow and invoice processing; others have coupled AP automation with adjacent areas (e.g., payments and/or financing); and still others are more dramatically attempting to expand the value proposition that links AP to broader finance (and even procurement) functions through expanded modules and capability, including to procurement.
Jason Busch serves as Managing Director of Spend Matters Nexus, a research and advisory group that works with sponsors, CEOs and boards on due diligence, M&A strategy and product strategy. Spend Matters and Spend Matters Nexus are owned by Azul Partners. Disclosure: Azul Partners served as an adviser to Marlin Equity in the Wax-Medius transaction.
Earlier today, Medius announced it is joining forces with Wax Digital. Specifically, Medius, a Nordic-based provider of AP automation solutions with a growing presence in North America, is acquiring Wax Digital, a UK-based source-to-pay suite provider.
The entity will be owned by Marlin Equity Partners, a private equity firm, which purchased Medius in 2017. For those like me who have been around this sector for too long, you might remember Marlin for its purchase of Emptoris (before IBM acquired the provider from Marlin).
Flash forward exactly one decade from that buyout, and the combination of Medius and Wax brings together two providers with different geographic and product strengths with a combined emphasis on targeting finance and procurement organizations.
As we kick off our analysis in this Spend Matters Nexus series analyzing the transaction, we’ll focus this first brief on providing a quick overview of Medius and Wax Digital, and graphically explain how both fit into the source-to-pay landscape. We’ll also offer up high-level strengths and weaknesses on the solution level (for Wax) and a detailed introduction to the Medius AP footprint. Finally, we’ll begin to explore the rationale for the combination.
Later this week, we’ll delve more deeply into a particular strength of Wax based on Spend Matters’ SolutionMap data showing it has happy customers, explore the benefits of bringing together finance and procurement solutions to drive a larger total accessible market (TAM), and offer deeper insight into the potential integrations/touchpoints between Medius and Wax Digital. Finally, we will share an analysis of the impact on the competitive landscape, exploring how the combination may impact competitive AP automation and invoice-to-pay vendors as well as procure-to-pay and source-to-pay suites.
Jason Busch serves as Managing Director of Spend Matters Nexus, a research and advisory group that works with sponsors, CEOs and boards on due diligence, M&A strategy and product strategy. Spend Matters and Spend Matters Nexus are owned by Azul Partners. Disclosure: Azul Partners served as an adviser to Marlin Equity in this transaction.
AP automation provider Medius today announced that it is buying Wax Digital, the UK-based suite provider of source-to-pay capabilities.
Medius, which is based in Sweden, sees the deal as a chance to allow its "current and future customers to generate increased automation, visibility and control across the entire purchasing process.”
Read more about the deal and how it reshapes the procurement technology market.
