Optimization, M&A Content

A Due Diligence Survival Guide: What to Expect (Part 1: Passing Architecture & Structural Product Scrutiny)

public procurement

This Spend Matters Nexus series on due diligence kicks off Nexus as its own subscription stream apart from PRO content.

The series is a survival guide on the due diligence process for sellers, especially all the areas outside of finance and accounting (though we’ll eventually get to this part of the process). And we hope that acquirers and investors — even seasoned corporate development, PE and venture types — will find it useful as well. We unfortunately know some buyers who could have spared themselves some headaches had they been as anal as we are in many of these areas.

Perhaps the biggest challenge that executives going through a fund-raising or transaction process face is that they are not adequately prepared for all the curveballs — many of the Astros batters facing the Nationals Stephen Strasburg’s recent loopers come to mind — that might get tossed their way in the due diligence process.

There are so many areas that investors and acquirers might decide to take an extra look at that even world-class “hitters” might not see them coming. And even those who think they are prepared for all the pitches might not fully anticipate the twists and turns the ball might take just before it hits the strike zone (we’ll stop with the baseball analogies, but with one of us coming from the North Side of Chicago, we’re empathetically giddy about our friends in Washington being able to claim victory in the World Series for the first time, turning around what initially looked to be a modest season).

The 2019 baseball Fall Classic aside, fully preparing for diligence is about practice (a topic we’ll explore later in this Nexus series), and it’s one that we ideally recommend companies rehearse — even though few will be prepared from “regular season” play alone at the level that ideally they should be at. Regardless, even those that do not practice sufficiently will stand to benefit from a comprehensive checklist about what to expect.



In Part 1 of our series, we’ll start first with an overall list of areas to consider from a diligence checklist perspective. Then we’ll immediately dive into what to expect around architecture and structural product diligence. (Warning: This is deep!) In the weeks to come, we’ll crawl out of the technology weeds as our exploration continues.

And of course throughout this Nexus series, we’ll aim to put a unique spin on the topic for procurement, finance and supply chain software companies, as these are the software segments we’re most experienced in scrutinizing — and occasionally preparing or dressing up for a process.

Let’s begin.

Jason Busch serves as Managing Director of Spend Matters Nexus, a membership, research and advisory organization serving technology acquirers (private equity, corporate development, etc.) and CEOs in the procurement and finance solutions marketplace (including contract management, B2B marketplaces/connectivity, indirect procurement, services procurement, direct procurement, commodity management, payment, trade financing, GRC/third-party management and related adjacent sectors).

20 Tips to Maximize Private Equity, Investment and Strategic Buyer Outcomes (Part 8: Knowing Your Weaknesses)  [PRO]

In this Spend Matters Nexus brief, we’ll look at our next-to-last tip for sellers to optimize the outcomes of an exit process/liquidity event when selling to private equity or strategic buyers. Tip 19, know your weaknesses, may sound simple, but it is an area where blindspots are more common than 360-degree vision.

Our tip today centers on the notion that for sellers, it is helpful to not only be able to articulate areas for improvement in such things as product (mix, capability, etc.), team, geographic presence, etc. But it is also important to display the right level of self- and market-awareness in what you would like to do about it. That is, if given the resources to execute.

If you are just getting introduced to this series, start with the earlier tips. (see Part 1 , Part 2, Part 3, Part 4, Part 5, Part 6 and Part 7).

Jason Busch is the Managing Director of Spend Matters Nexus, a membership, research and advisory organization serving technology acquirers (private equity, corporate development, etc.) and CEOs in the procurement and finance solutions marketplace (including contract management, B2B marketplaces/connectivity, indirect procurement, services procurement, direct procurement, commodity management, payment, trade financing, GRC/third-party management and related adjacent sectors).

20 Tips to Maximize Private Equity, Investment and Strategic Buyer Outcomes (Part 6: Acquisition Strategy and the ‘End Game’) [PRO]

In this Spend Matters Nexus series, we’ll go over Tips 14 and 15 as we continue to explore the ways for sellers to maximize private equity, investment and strategic buyer outcomes in the procurement solutions market and others. Now, let’s turn our attention to two areas: the importance of fleshing out an acquisition strategy and roadmap — and “knowing the end game” in terms of likely future buyers after the next phase of the company’s growth. In our exploration, we share the best practices and not-so-best practices that we have observed across the hundreds of transactions we have been involved in.

So far in this Nexus series, we’ve covered the initial 13 of 20 tips (see Part 1 , Part 2, Part 3, Part 4 and Part 5). Let’s check out Tips 14 and 15 now.

Jason Busch is the Managing Director of Spend Matters Nexus, a membership, research and advisory organization serving technology acquirers (private equity, corporate development, etc.) and CEOs in the procurement and finance solutions marketplace (including contract management, B2B marketplaces/connectivity, indirect procurement, services procurement, direct procurement, commodity management, payment, trade financing, GRC/third-party management and related adjacent sectors).

20 Tips to Maximize Private Equity, Investment and Strategic Buyer Outcomes (Part 5: Bankers, Added Metrics and Differentiation) [PRO]

In this Spend Matters Nexus brief, we’ll look at Tips 11, 12 and 13 (out of 20) for maximizing seller outcomes for private equity, investment or strategic transactions.

Collectively, the Spend Matters team has analyzed hundreds of solution providers in the past two decades from a corporate development and private equity lens. We’ve also been involved on the other side of the transaction table as well, with sellers. Based on that experience, this series represents the comprehensive advice we would give sellers before a transaction to achieve the most advantageous outcome.

Today, we turn our attention to three areas: investment bankers (where they add the most value vs. not); the benefits of established “added” metrics to track the business; and explaining and justifying competitive differentiation in a manner that investors will believe (or not).

So far in this Nexus series, we covered the initial 10 tips to prepare for the process itself (see Part 1 , Part 2, Part 3 and Part 4).

Jason Busch is the Managing Director of Spend Matters Nexus, a membership, research and advisory organization serving technology acquirers (private equity, corporate development, etc.) and CEOs in the procurement and finance solutions marketplace (including contract management, B2B marketplaces/connectivity, indirect procurement, services procurement, direct procurement, commodity management, payment, trade financing, GRC/third-party management and related adjacent sectors).

20 Tips to Maximize Private Equity, Investment and Strategic Buyer Outcomes (Part 2: Before the Process — TAM and Scenario Planning) [PRO]

Many solution providers’ executive teams that we have observed are not as prepared to enhance their chances of optimal private equity, investment and M&A outcomes. This Spend Matters Nexus series provides insight from the thousands of hours we have spent working with private equity groups, CEOs and boards to evaluate acquisition targets — and with sellers to optimize exit scenarios and outcomes in the procurement solution market.

In the first installment of the series, we provided five recommendations to prepare wisely for an eventual process.

Today, we continue the analysis with our next tips to consider as the actual process approaches (i.e., “pre-process” tips). These include instructive recommendations on taking the time to build a total addressable market (TAM) model and scenario planning/rehearsing the actual process itself, including how to prepare and interrogate a “data room.”

Later in the series, we will explore the deal process itself, offering tips for stewarding the effort and driving to an optimal outcome.

Jason Busch serves as Managing Director of Spend Matters Nexus, a membership, research and advisory organization serving technology acquirers (private equity, corporate development, etc.) and CEOs in the procurement and finance solutions marketplace (including contract management, B2B marketplaces/connectivity, indirect procurement, services procurement, direct procurement, commodity management, payment, trade financing, GRC/third-party management and related adjacent sectors).

Jaggaer sells majority stake to private equity firm Cinven

procurement

The procurement suite provider Jaggaer announced Monday that the private equity firm Cinven is buying a majority stake in Jaggaer, which will continue to focus on its unified Jaggaer ONE spend management offering and will look to expand into new markets. Jaggaer said no management changes were planned.

Announcing Spend Matters Nexus — Where Capital and Strategy Converge

As I hinted at last week, we’re excited to announce the launch of a new research, advisory and networking organization — Spend Matters Nexus.

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 for solution provider CEOs, boards and leadership teams on their own strategy, corporate development and business development/partnership initiatives.

Spend Matters Nexus will hopefully become invaluable for both groups. The goal is to provide market intelligence, strategy and due diligence advisory for private equity firms and investors. For CEOs, boards and leadership teams, the program offers insights spanning strategy, corporate development and business development/partnership topics. For all members, there are invitation-only networking opportunities.

Coupa’s 3 Special Forces Teams (Part 1: Corporate Development) [PRO]

Coupa has assembled three behind-the-scenes weapons — non-product, non-solution and non-R&D teams — which it uses to great effect to collectively win individual battles against competitors and, at least so far, the broader growth war in the source-to-pay market from a logo growth perspective in recent years. These are effectively “special forces” groups that have leverage far beyond their individual ability to contribute alone (but would not be successful without the broader Coupa arsenal that they’re supporting).

Other vendors may have one of these weapons individually. Or on paper. But collectively Coupa is the only one that combines them to great effect as it moves its chess pieces around the tactical and strategic board. This Spend Matters PRO brief provides a unique take from the perspective of   long-time industry insider who has seen them put to use effectively from a unique vantage point. Today we start by exploring the first of Coupa’s special forces teams: corporate development.

Jason Busch serves as Managing Director of Spend Matters Nexus, a membership, research and advisory organization serving technology acquirers (private equity, corporate development, etc.) and CEOs. The views expressed in this research brief are his and do not necessarily reflect that of the Spend Matters analyst team.

2019 M&A and Investment Dynamics For Procurement Technology and Solutions: Segmenting the Market (Part 1) [PRO]

Private equity — and other — buyout and M&A interest in the procurement solutions market is at an all-time high. We define procurement solutions as technologies and services that target a range of areas that include:

— Core procurement (i.e., source-to-pay, procure-to-pay, etc.)
— Direct procurement
— Services procurement
— Contract management (that goes beyond supplier contracts)
— Accounts payable
— Trade financing (B2B Fintech)
— B2B (transactional connectivity, marketplaces, aggregation and GPO models)
— Third-party (supplier) management from a GRC standpoint as much as from a procurement standpoint

This multi-part Spend Matters PRO research brief explores the “who” (i.e., what types of companies are attracting the most interest and the profile of different buyers), the “why” (i.e, typical investment theses) and the “how” (i.e., the mechanics of deal processes and what is unique to the solution area, including where buyers that are new to the sector often have a higher learning curve than expected). It also explores some important dynamics in the market that have changed in recent months as buyer interest from both the strategic and financial sides increases.

Today we begin by exploring the “who” by segmenting the types of targets that are garnering the most attention into 10 areas and exploring the first five in detail (procurement technology suites, transaction-focused solutions, payment/financing providers, nimble solutions and leveraged buying / GPO models), including sharing illustrative providers in each segment and why buyers are attracted to each group.

* Our parent company, Azul Partners, has directly advised on more than half a dozen transactions in recent quarters, primarily working in a due diligence and strategy capacity for both strategic and financial buyers, leveraging our proprietary SolutionMap benchmark database, customer satisfaction/peer review benchmarks, PRO research, SolutionMap Insider research, and deep domain knowledge. Azul Partners works with investors in two ways. First, we partner with clients as exclusively retained subject matter experts in these markets. Second, we serve as an “arms dealers,” providing subscription research to hundreds of clients.

Certify, Chrome River to Merge Their T&E, Invoice Management Prowess

Certify and Chrome River Technologies, two travel & expense providers who also offer invoice management software, will merge in a deal that’s valued at over $1 billion, a statement Tuesday said. It also realigns the market and makes the investor in the transaction an even bigger player in this sector, two Spend Matters' analysts said. Portland, Maine-based Certify and L.A.-based Chrome River initially will operate separately but will collaborate on investing in technology like artificial intelligence, machine learning, analytics and reporting, the announcement said.

Corcentric to Acquire Determine: Exploring Determine’s Procure-to-Pay Strengths and Weaknesses (Part 3) [PRO]

Corcentric recently announced its pending acquisition of Determine (see previous Spend Matters PRO analysis: Transaction Overview and Customer Recommendations and Competitive Landscape Analysis — and news coverage here). But in buying Determine, what exactly is Corcentric gaining from a procure-to-pay perspective (i.e., product, solution and platform strengths and weaknesses)? And how do Determine’s capabilities stack up in the market overall relative to peers on a granular basis?

To answer the latter question, you can turn to the latest Q4 2018 SolutionMaps for e-procurement, invoice-to-pay and procure-to-pay SolutionMap Insider provider scoring summaries. For those interested in viewing Determine from a broader source-to-pay perspective, there is a SolutionMap for you as well. Each report provides comparative overall and “deep-dive” capability insight (e.g., catalog management, requisitioning, invoicing compliance, etc.) as well as detailed customer reference benchmarks. Determine is one of dozens of providers featured in these granular, comparative vendor ratings analyses — others include Basware, BuyerQuest, Coupa, Ivalua, Jaggaer, Oracle, SAP Ariba, Tradeshift, Taulia, Vroozi and Zycus — designed to aid shortlisting and selection decisions.

But to provide insight into overall product strengths and weaknesses for P2P, let’s dive right in today as we offer a summary view of where Determine stands out from the pack — and where it trails its peers. We’ll offer a similar analysis for sourcing, supplier management, contract lifecycle management (CLM) and spend/procurement analytics (collectively Strategic Procurement Technologies in SolutionMap) in a subsequent research brief in this series.

Avetta and Browz to Merge: Facts, Figures, Solution & Market Overview (Part 1)  [PRO]

Avetta announced earlier today that it and Browz are merging. Together under the Avetta name, the two providers of supplier management and supply chain risk management will become one of the clear leaders in perhaps the most “under the radar” procurement solutions market. The general focus of these two providers is on supplier and contractor on-boarding, pre-qualification and virtual auditing in support of vendor compliance, environmental, health and safety, risk management and related initiatives. SaaS-based enablement is a component of what Avetta and Browz do, but the real value they bring is based on the network impact and scale economics focused on supplier/contractor intelligence they provide to buyers and suppliers alike on a many-to-many basis.

Avetta, Browz, ISNetworld, Achilles and other similar solution providers compete in this somewhat niche — though quite sizeable and rapidly growing — area of the supplier management and supply chain risk management worlds. While not as well-known as providers like Coupa, Jaggaer and Ivalua (let alone SAP Ariba and Oracle), these four providers — along with a handful of other vertical and geographic specific providers — represent one of the fastest growing $500 million+ procurement solutions markets (2018 revenue), one that the vast majority of procurement and supply chain organizations know quite little about the inner workings of.

For many Spend Matters readers, this really is the largest procurement solutions market you’ve never heard of.

Over the course of the coming weeks, this Spend Matters PRO series will explore the combination of Avetta and Browz and what it means for the market. It will also unpack this market segment and explain how it fits alongside supply chain risk management, supplier information management (SIM), supplier performance management, master data management and adjacent sub-components of the supplier management market. We’ll also provide an outlook for customers of these solutions and for the broader growth of this sector as well (which Avetta pegs at a $14 billion market potential based on a referenced study to McKinsey in a briefing with Spend Matters prior to the deal announcement).

Today, we will start with a quick overview of the Avetta and Browz deal itself (facts/figures, estimated revenues, rationale, analysis, etc.) based on a variety of sources. Part 1 also includes a brief history of both providers and an overview of the current state of this market. For this series, our reference inputs include an interview earlier this week with the CEO of Avetta, John Herr, and over a dozen of other interviews conducted in recent years, as well as existing Spend Matters research (see previous Spend Matters PRO coverage on Avetta: Introduction/Background, Strengths / Weaknesses and Competitive Analysis/Customer Recommendations).