Selectica and Iasta – further thoughts on a procurement software marriage

The acquisition of Iasta by Selectica is one of those transactions that has (potentially) more and deeper implications than there might appear on the surface. Two mid-sized firms by the standards of our industry, both turning over just over $10 million, with pretty clear and attractive synergy without too much overlap.

So Iasta are strong in Europe with products including spend analytics, sourcing, and business intelligence for procurement (they’re a leader in terms of ‘dashboards’).  Selectica on the other hand are very US-centric, with a focus on deep contract lifecycle management. Whilst Iasta have some of that capability, Selectica looks like it’s products operate at a different and somewhat deeper level in that 'contract lifecycle management' field.

But there are a few somewhat different elements here compared to most transactions. The apparently low price has puzzled some observers, Iasta selling out at around 1.5 revenues, compared with the 10 + we’ve got used to, particularly if SAP are the buyers.  And the whole question of why now for Iasta – a firm who have taken pride in their independence and steady growth for ten years or more.

The answer may lie in the aspirations of the Iasta team. As my US colleagues explore in more depth, Iasta’s owners are keeping significant skin in the game in the new organisation through a substantial shareholding in Selectica. They may see the merged firm as a vehicle to drive faster growth, maybe using the currency of a quoted company to make further acquisitions? And for Selectica, whose results haven’t been stellar recently, this gives them a boost in terms of revenue and market credibility, they must hope. As my colleagues said:

At its core, the transaction represents a “stealth IPO” for Iasta and dramatic expansion of Selectica’s value proposition and target customer set. Iasta will now have a public currency, without having to go through the initial filing process (Iasta was also too small, by US standards, for a typical NASDAQ listing, although smaller competitors, such as Rosslyn Analytics, have recently floated on the AIM).

In terms of Europe, Iasta are a lot larger than Selectica, and the expectation is that the whole Iasta European team will continue in their roles. We believe that rather than any rationalisation, there is likely to be growth in staff numbers here as they no doubt look to promote Seletica’s products into current Iasta accounts, as well as seeking new customers of course. Senior people such as Sean Delaney and Mike Pringle are expected to stay, and indeed the top team from Iasta seem genuinely excited about this. There’s nothing here we can see to worry current clients in our opinion.

In the meantime, do read more and deeper analysis from my colleagues – here, and for PRO subscribers, here as well.

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First Voice

  1. Patrick Chabannes:

    A different point of view. This the second eSourcing company acquired in the last 6 months. And for the second time we see numbers close to 1 to 1,5 the annual revenue. Bad news for eSourcing software shareholders !
    SAP bought 10 times the revenu because of the supplier network. Iasta as well as other S2C software companies failed to deploy its technology outside their mother country.

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