Nexus Content

3 Deals Signal a Changing M&A Landscape in Procurement Technology and Solutions (Part 1: Coupa-ConnXus)

Despite coronavirus lockdown measures, the past couple of weeks have seen a flurry of deal announcements in the procurement technology and solutions world (which represent the M&A “re-start” of about a dozen material transactions that you’ll be hearing about for the rest of the year).

Deal activity is not just financial engineering. It is form following function. And form in this case is the fact that procurement technology and solutions are still going strong in most cases inside companies and government. In other words, they’re still buying stuff, at least in many cases.

The reason procurement technology and solutions, even in the economic uncertainty maelstrom of COVID-19, are still hot compared with other sectors is simple: No other set of capabilities or tech can be tied so directly to cost reduction/takeout, risk mitigation, working capital improvement and process efficiency/automation (yeah, we know what that can sometimes be code for, but unfortunately it’s true — as labor economists would agree).

In short, even in the current mess, companies and the public sector are still active consumers of procurement technology and solutions. And on the transaction side, deals aren’t slowing down entirely either, even if the debt markets are still a challenge. Moreover, valuations aren’t taking the same hit as in other sectors (either in the private deals we’re seeing or in the capital markets). Coupa’s stock, in fact, just hit an all-time high last week, valuing the company at nearly $13 billion, putting the firm at over 30X revenue on a trailing basis. That’s HUGE.

Still, there’s changes afoot from a deal perspective. And I believe three recent transactions collectively suggest precisely how the M&A landscape is changing.

In this three-part Spend Matters Nexus analysis, I will share my own perspective on the shifts, both from a corporate development lens (what I used to do) and a private equity lens (the practice I lead today for Azul Partners).

Some of these shifts are subtle, others not so much. But one thing is coming into sharp focus for me: More folks are going to miss out on opportunities if they fail to put the right pieces on the chessboard soon.

Deals covered in this series are Coupa-ConnXus, Apttus-Conga, and Bregal Sagemount’s recent $80 million investment in Corcentric.

For each, here are the questions I’ll answer:

  • What is the summary of the transaction?
  • What is the “gotcha” of the deal (for me)?
  • What additional factors make the transaction interesting?
  • What does it signal for tomorrow (why is it an important signpost for the road ahead)?
  • What are the competitive/market implications for sponsors and strategic buyers?
  • What other (related) providers are interesting to look at in the same or similar markets?

For this installment, let’s look at the Coupa-ConnXus deal.

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.

The impact of COVID-19 on M&A and procurement technology investing (Part 2: Private Equity)

Outside of highly targeted or opportunistic investment interests, the technology and solution areas for procurement and finance have only garnered significant attention within the private equity community in recent years. But in less than half a decade, these firms have become a staple in M&A in the sector. And not only has private equity driven the acquisition and buyouts of many of the largest companies in the sector, but it has also been a source of growth capital investments as well (albeit not as frequently). In recent years, just about every process above a certain size — including numerous providers eventually picked up by strategic buyers — involved one or more private equity firms at some stage.

I spend a good portion of my time leading Spend Matters’ effort to provide strategy and due diligence support to these firms, and in recent weeks, I have been in touch with over a dozen colleagues in the industry. Today, in Part 2, we turn our attention to this segment of the market, examining the COVID-19 situation on the private equity markets, in particular, as it pertains to M&A and buyouts.

This Spend Matters Nexus series, including today’s column, is open to everyone during the coronavirus crisis. It provides insight and analysis about what is happening with procurement and finance technology investing — as well as what we can expect in the months to come, as we emerge from the coronavirus disruption.

If you’re looking for a baseline of information on M&A in these markets at the moment, read Part 1 of this series: The Impact of COVID-19 on M&A and Procurement Technology Investing (Part 1: 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.

The Impact of COVID-19 on M&A and Procurement Technology Investing (Part 1: Introduction)

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.

DocuSign-Seal Software transaction analysis (Part 1): Looking at DocuSign’s CLM assets (DocuSign, SpringCM, Seal)

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)

How does McKinsey’s acquisition of Orpheus affect Sievo and the spend analytics solution landscape? (Part 1: Background)

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.



But more important than what this means for Sievo as a potential strategic partner for others, alone, is what it means for all the other vendors, consultants, managed services and BPO firms in the market looking to build, OEM or acquire the right procurement, finance and spend analytics capabilities for their needs now that Orpheus has been taken off the chessboard. I’ll also explore this topic as well in this Nexus analysis.

Let’s dive in.

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.

McKinsey buys Orpheus: Valuation Estimates, Product Strengths/Weaknesses and Implications for the Firm & Its Clients

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:

McKinsey buys Orpheus: Company and Solution Overview + Rapid Transaction Analysis

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:

Omnia acquires InsightGPO: Putting M&A at the center of a growth strategy

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.

2020 M&A and Procurement Investment Predictions: 10 Trends to Watch (Part 2)

procurement

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

2020 M&A and Procurement Investment Predictions: 10 Trends to Watch (Part 1)

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!

20 Tips to Maximize Private Equity, Investment and Strategic Buyer Outcomes (Part 9: Defining the ‘Post-Close’ Plan) [PRO]

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.

If you are just getting introduced to this series, start with the earlier tips. (Click here for Part 1, Part 2, Part 3, Part 4, Part 5, Part 6, Part 7 and Part 8).

Why would Medius buy Wax Digital? (Part 4: Strategy and competitive landscape analysis for procurement and ERP vendors)

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.



If you are just coming up to speed on the Wax Digital-Medius combination, start here with this Nexus series — (Part 1: Company Backgrounds, Product Strengths/Weaknesses, Deal Rationale), (Part 2: Wax strengths, customers, integration considerations), and (Part 3: Strategy and competitive landscape analysis for AP automation and invoice-to-pay). Free Spend Matters’ news coverage of the deal can be found here and here.

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.