Breaking News – Xchanging acquires MarketMaker4

Xchanging announced this morning its acquisition of MarketMaker4, a US based provider of strategic sourcing tools and embedded market intelligence, in a transaction that  brings together a global business process outsourcing (BPO) and services firm with a next generation sourcing solutions provider.

Xchanging are London based, publicly quoted  but international with big procurement clients including BAE Systems, National Australia Group and L'Oreal. Here are some of the details of the transaction via the WSJ: Xchanging will pay a potential total consideration of up to US$22 million, paid as an initial consideration of US$11 million, in cash, on contract signing, with further payments totalling up to US$11 million payable between 2014 and 2016, contingent upon MM4 achieving defined milestone performance criteria. The transaction adds a higher margin business to Xchanging's Procurement Services and is value enhancing both for the Procurement Services business as well as for Xchanging overall. The three founding shareholding directors of MM4 will remain with the business.

"Xchanging will pay a potential total consideration of up to US$22 million, paid as an initial consideration of US$11 million, in cash, on contract signing, with further payments totalling up to US$11 million payable between 2014 and 2016, contingent upon MM4 achieving defined milestone performance criteria. The transaction adds a higher margin business to Xchanging's Procurement Services and is value enhancing both for the Procurement Services business as well as for Xchanging overall. The three founding shareholding directors of MM4 will remain with the business".

It's a very interesting move for an outsourcing firm - but we have mentioned previously how Xchanging were beginning to develop their own proprietary software in the field of a unique programme management / savings tracking hybrid. This step takes them further into the fairly uncharted waters of being able to offer a blend of outsourcing type services along with technology solutions (although  I guess IBM might say they can do the same since the Emptoris acquisition)?

MarketMaker4 are not well known this side of the Atlantic but according to my colleagues in the US provide a fairly standard sourcing solution but are "further ahead than other sourcing tool providers in embedding category/market intelligence as a core component of the offering – this is one element that really causes the solution to stand out".

The cockpit / dashboard concept they bring to the user interface of the product is also unusual and "could be extended to many other areas of procurement" according to my sources.

Ed Cross, who leads Xchanging's procurement sourcing business, is in the US and told my colleagues there that the MarketMaker4 business will continue to operate independently and as a separate company based in the US. “We do not want to dilute their focus,” he said. “We want them to act independently and continue to build a next generation sourcing cockpit and control panel for procurement.”

More on this early next week!

 

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