tech m&a update – digital experience design · 2015-12-14 · o october 2015 independent...
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October 2015
I N DEPEN DENT I NVESTMENT BAN KI NG FOR GLOBAL TECHNOLOGY, MEDIA, MARKETING & INFORMATION
since 1987
Tech M&A Update – Digital Experience DesignThis month’s letter is written by David Clark, Managing Director, [email protected]
What do Salesforce.com (cloud CRM), EPAM Systems (software development), E&Y (industry consulting) and Capital One (consumer credit) all have in common?
A lack of experience. Or rather, a recognized lack of experience design capabilities. Enough so that each has acquired digital “Experience” firms to backfill that need.
And they are not alone. In the past 24 months, JEGI has tracked over 20 transactions where varied strategic buyers have acquired UI/UX (User In-terface/User Experience), or “Digital Experience Design” firms.
What is Digital Experience Design? In short, it is the specialized combina-tion of:• Digital Strategy and Product/Service Design• Application Development
• Back-end Systems Integration
And doing all of them well, together, is hard.
digital strategy and product/service designThink researchers and designers who focus on all of the interactions that make digital content and services easier to access and maintain, from an end-user perspective. Think about the difference between designing an online service like UBER and online payment of a speeding ticket; or the design of an online B2B catalogue covering thousands of industrial parts vs. data visualization tools for complex data analysis, like energy pricing. Each of these cases involve wildly different business requirements, end-user personas, and usability factors. All of which impact Digital Experience, hopefully in a positive way.
application development
It is (relatively) easy to design a digital product or service as a mock-up or wireframe. It’s quite another to translate visual and interaction design into feasible technical architecture, and then build IT. “IT” can be a web, mobile or portal-based application. IT can operate across multiple operating systems and presentation technologies (HTML, JavaScript, Ajax). IT can run the gamut from a consumer-facing mobile reservation system for a global lodging chain (incorporating multi-lingual, multi-currency ecom-merce), to a set of work flow tools that help tax accountants access client and tax code data to streamline corporate filings.
Designing these applications is made more difficult by the “Amazon” expectation that online customer interactions will be personalized (via linkage to loyalty programs, for example), and that B2B content delivery will be configured and automated based on end-user roles and rules. So, if you are a consumer or an enterprise end-user and your application doesn’t recognize you and make YOUR life easier, that’s a BAD EXPERIENCE.
JEGI Tech M&A Update - October 2015
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back-end integration
In most large enterprises, the data or content required to “power” these applications is housed in multiple back-end systems (Digital Asset Management, CRM, Web Content Management, Inventory, etc.). En route to end users in the form of a personalized, or role-based interaction, this data and content also needs to pass through a variety of marketing au-tomation and analytics suites. I see you. I know you. I observe what you’re doing. I predict your need. I call the database and give you this: a page, an offer, or a work flow prompt.
To deliver these personalized digital experiences, an insane number of technical handshakes are required between core enterprise systems and data providers, such as Salesforce, Experian, Sitecore, IBM WebSphere, Adobe and Hybris, and an equally insane array of specialized point applications, such as Tableau (Data Visualization), ClickTale (Customer Experi-ence Analytics) and Maxymiser (Cross-Channel Optimization). Building the connections between end-user interfaces and applications and back-end systems is the heavy lifting in Digital Experience Design.
you’re only as strong as your weakest link
We’ve all been spoiled by the really positive digital experience that hums – from the process of searching for and dis-covering what you want, tapping on your phone to buy it, and the simultaneous email confirmation that your room is booked, your part has shipped, or your trade is confirmed. From anywhere. The technology that enables that level of digital experience is complex and never sits still. And the skills required to design, build and integrate the component parts – interfaces, applications and connectors – are in high demand and short supply. Hence the run on Digital Experi-ence Design firms.
When we look at recent transactions involving Digital Experience Design firms, we see industry-leading firms who for very different reasons have realized that these skill sets are absolutely critical to transforming legacy offers and launch-ing new digital business models, for themselves and their clients. For example:
Buyer Target Rationale
Salesforce.com ÄKTA Experience design for Salesforce cloud products and ecosystem
EPAM NavigationArts* Push offshore developer resources into higher value Sitecore build engagements
EY Seren Expand digital consulting services and capabilities
Capital One Adaptive Path In-house digital product development and innovation
*JEGI represented NavigationArts in this transaction
Developments in the Internet of Things (“IoT”) will only accelerate this trend. No business is unaffected, and that explains the fascinating array of buyer vs. seller transactions in the Digital Experience space and the continued redefinition of mar-keting and technical services.
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Private Company Spotlight – InfinisourceEach issue, we spotlight an interesting, emerging growth, privately-held company for our audience. As experienced tech investment bankers, we will point out the characteristics that enable these companies to be fast-developing market lead-ers and ultimately become compelling acquisition targets for strategic companies, as well as later-stage growth equity and private equity investors.
This month, our Private Company Spotlight shines on Infinisource, a leading provider of an array of human capital management (HCM) so-lutions to enterprises with between 50 and 1,500 employees – a mar-ket segment that is over $6 billion in size.
We like Infinisource for many reasons, including: (i) it has a broad, integrated offering that is perfectly tuned and well-suited for small and medium-sized companies (SMEs); (ii) it utilizes a combination of a direct sales force for the higher end of this market, along with an innovative network of certified partners to reach out more broadly to the large uni-verse of SMEs; (iii) it is exploiting huge tailwind market drivers, such as the move to SaaS and the Affordable Care Act; and (iv) it typically signs long-term subscription contracts with its customers and has very low churn, all while main-taining very impressive revenue growth rates and cash flow.
We recently spoke with Infinisource’s CEO, Dave Dawson, to get his perspective on the company’s progress and how Infinisource differentiates itself in a noisy HCM market.
In summary, what does Infinisource do? What are your main offerings?
Infinisource is a leading provider of HCM solutions for SMEs in the U.S. Our primary product is iSolved, a cloud solution that gives customers a single web based platform for payroll, time & attendance, benefits administration and core HR functions. All functions within iSolved are native and built from the ground up, making it one of the few platforms that is not cobbled together from a web of independent technologies. Infinisource also provides HCM managed services to a subset of our customers, such as Cobra and flexible benefit administration.
There has been a great deal of attention on HCM solutions for the large enterprise market, but Infinisource focuses on SMEs. We believe that the SME market has been somewhat neglected in the HCM market over the past decade or so. What about this market segment is attractive to you, and why is Infinisource well positioned here?
The SME segment represents 39% of the employees in the U.S., so it is a very large market that has been underserved in regards to HCM capabilities. Historically companies in this segment have not used an integrated HCM platform, because of availability, expense, functionality and need. However, the product and regulatory market has shifted over the past few years, enabling SME companies to afford and purchase an integrated HCM platform, and the regulatory environment is encouraging them to buy.
We estimate approximately 10% of SMEs currently have an integrated platform, so it is still underpenetrated. When you combine “affordable solution” with “regulatory need” and apply that to an untapped market, you get an Oklahoma Sooner-like rush of customers acquiring HCM platforms. We love the SME segment.
As the HCM market has grown up, it has been characterized by the formation of many best-of-breed solution providers focused on a particular piece of functionality (i.e., applicant tracking, performance management, etc.). More recently we started to see consolidation among these point solutions in order to quickly create suites across larger areas within HCM. What has been your approach to providing point solutions vs. suites when dealing with customers in the SME market?
We view iSolved as the HCM “plumbing” that every customer in our target segment requires. We recognize that certain subsets of our customer segment might need more exotic capabilities or “fixtures” that work with the plumbing that we provide. To address this, we created the iSolved Marketplace, which is very similar to a NetSuite or Salesforce mar-ketplace in that we have a number of pre-integrated, high-quality applications that deploy easily and work with our plumbing. This allows our customers to upgrade to exotic functionality if and when they need it.
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What economic or regulatory trends are helping drive your business?
The Affordable Care Act is definitely driving the payroll and benefits functions together. If a company is not utilizing an HCM platform covering payroll and benefits, then they will be doing unusual gymnastics to maintain ACA compliance and accurate reporting over the coming years. This situation is definitely helping to fuel our market.
I would also say that over the past few years the Department of Labor has ramped up enforcement efforts for a number of existing labor laws, and the cutting edge customers in our segment realize an HCM platform helps them maintain labor law compliance across the board.
You’ve experienced a great deal of growth in getting to this point. What are the key initiatives you have in place that will drive growth going forward?
Infinisource utilizes a combination of direct sales and a powerful Certified Partner Network to distribute iSolved. Our Certified Partners are elite regional HCM service companies with spectacular relationships in their respective regions. Each Certified Partner is equipped with a full ecosystem to sell, implement and service iSolved, and they are all having strong success selling our platform. Given this explosive growth, we plan to continue our investment in building out the Network.
We also maintain a small, but high performing, direct sales force that allows us to keep in touch with changing market conditions, while focusing on the upper portion of the SME segment. This two-pronged sales approach has resulted in our ability to capture SME market share four times faster than any of our competitors.
JEGI Tech M&A Update - October 2015
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Hey, Did You See This?ActiveOps – September 23, 2015 ActiveOps, a global leader in operations performance management, has been engaged by Atos, a leader in digital servic-es, to bring employees onto an enhanced management system which will enable more efficient capacity planning and performance management processes to continue to deliver top quality services. The Active Operations Management (AOM) method and Workware software provided by ActiveOps will be implemented across a number of Atos service centers in the UK to support continued growth without substantially increasing costs.
Brainshark – August 4, 2015Brainshark, delivering SaaS-based sales enablement solutions, announced powerful, new analytics capabilities in its Sales Accelerator platform. The Brainshark Sales Accelerator shows how sales reps’ knowledge and behavior affect sales outcomes, providing actionable insights that drive greater productivity and more deals. In addition to its new, powerful analytics, the upgraded version provides resources for sales onboarding, continuous training, prospecting, live presenta-tion delivery, coaching and content development – all centrally accessible within Salesforce.
Fluid – September 28, 2015Fluid, provider of software products and services that enable personalized and customized shopping experiences, in-troduced a new software solution, Visual Mix & Match™. Fluid Visual Mix & Match will enable digital shoppers to dy-namically create and visualize bundles of related products, in context and at photorealistic quality. Bringing together the best of the real world and digital shopping experiences, Fluid Visual Mix & Match will allow shoppers to seamlessly interchange millions of combinations from entire product lines in a highly visual fashion that was previously not practical at scale.
HeyWire – September 15, 2015Heywire, a leading enterprise text messaging service provider, recently launched HeyWire LiveText Agent version 3.0, empowering businesses to connect with customers via text message. This version integrates with Salesforce omni-channel contact centers, enabling contact center agents to send and receive customer texts and retain all interactions within Salesforce for service and data retention needs. The LiveText Agent version 3.0 will allow businesses to capture many mobile consumers who use texting as their preferred channel of communication.
HG Data – August 19, 2015HG Data, provider of competitive intelligence on installed technologies, announced a formal partnership with Bombora, an aggregator of B2B intent-driven data, to combine their data sets for use in programmatic ad targeting. This part-nership will enhance the targeting possibilities for online Account Based Marketing (ABM) programs and will work to change the way customers see third party audience segments and their underlying value.
PlumChoice – October 7, 2015PlumChoice, the leader in specialized tech services for the Internet of Things (IoT) and cloud enablement, released alarming new data that reveals a pervasive disconnect between brands who provide connected, IoT products and the consumers struggling to use them. The report reveals that 67% of consumers struggle to use common connected de-vices, while less than half of all respondents seek help with these gadgets. When they do ask for help, only 20% of con-sumers say they are satisfied with the technical assistance they receive. This data reveals an opportunity for brands to educate consumers and capitalize on technical support offerings.
Yext – September 28, 2015Yext, the global Digital Location Management (DLM) leader, announced the launch of Xone, its new mobile audience engagement product that offers brick and mortar businesses a new way to serve their customers during in-store visits. The core feature, Xone Tips, will allow businesses to serve mobile content screens to customers who are within range of an in-store Xone Beacon. Xone is intended to help businesses increase real-time engagement with their mobile customers.
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Selected September M&A Transactions in JEGI Tech Coverage
Buyer Seller Target DescriptionEnterprise
Value ($mm)
Vista Equity Partners Solera Holdings Automotive claims processing software $3,744
Siris Capital Group Premiere Global Services Web conferencing & collaboration SaaS $655
Thoma Bravo MedeAnalytics Healthcare BI analytics SaaS $500
BlackBerry Good Technology Mobile device management software $425
FactSet Research Systems Portware Trade execution management software $265
Microsoft Corporation Adallom Enterprise security SaaS & software $250
AOL Millennial Media Mobile advertising & monetization software $248
NeuStar Assets of Transaction Network Services (Siris Capital) Caller authentication services assets $220
SS&C Technologies Primatics Financial Financial risk management SaaS $122
Riverside Company Baker Hill Assets (Experian Group) Banking & credit BPO services $100
Barracuda Networks Intronis Backup & recovery SaaS $65
Momentum Telecom Alteva Hosted unified communications-as-a-service $29
Constellation Software Market Leader Lead generation SaaS $23
Perk.com AppRedeem Mobile rewards applications $2.5
@WalmartLabs (Wal-Mart) PunchTab In-store customer analytics SaaS
Ahern Information Technologies
Progressive Platforms (Wyless) GPS fleet tracking SaaS
Amazon Web Services (Amazon.com) Elemental Technologies Video processing software
Anaqua (Beacon Equity Partners) ideaPoint IP management & collaboration SaaS
AppDirect AppCarousel White-label application management & distribution
Apple Mapsense Location data collection & analysis
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Deals with Values (by size)
Deals without Announced Values (alphabetical by buyer)
JEGI Tech M&A Update - October 2015
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Buyer Seller Target DescriptionEnterprise
Value ($mm)
Associated Time & Parking Controls CTE Systems Time & attendance management software
Carbonite Rebit, Patents and IP Assets Backup & recovery software & SaaS
Demandbase WhoToo Marketing data analytics SaaS
First Data Corp (Kohlberg Kravis Roberts & Co) Spree Commerce Open source e-commerce SaaS
GetWellNetwork (Welsh, Carson, Anderson & Stowe) Skylight Healthcare Systems Patient engagement & management SaaS
HealthPort-IOD (New Mountain Capital) ECS Health record services & software
HGGC StrongView Systems Email marketing & analytics SaaS
IBM Corporation Meteorix Workday systems integrator
IBM Corporation StrongLoop Mobile application development tools
Microsoft Corporation Double Labs Android lockscreen personalization application
Microsoft Corporation VoloMetrix Workforce performance analytics software
Rentrak Corporation SponsorHub Marketing media analytics SaaS
RIVS Async Interview Online video interviewing SaaS
salesforce.com AKTA UX & mobile app development
ScribeAmerica eScribe Management Services Videoconferencing-based medical transcription services
Simply Measured Inside Social Social media marketing analytics SaaS
SS&C Technologies Varden Technologies Investment reporting & communications SaaS
TA Associates Mitratech Holdings (Vista Equity Partners) Legal practice management SaaS
WorkWave (Chicago Growth Partners) ContactUs.com Contact form-based lead generation SaaS
WorkWave (Chicago Growth Partners) RefGo Customer reviews publishing SaaS
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Recent and Upcoming EventsDMA &THEN – October 4-6, 2015JEGI attended DMA’s &THEN conference earlier this month in Boston. DMA’s reinvented annual event is designed as an immersive marketing experience, bringing together the next generation of digital, data-driven marketers.
JEGI Managing Director Amir Akhavan mod-erated a panel titled “The Rise of Machine Intelligence”, focused on the new generation of Machine Intelligence tools that help with everything from recognizing speech patterns to sorting through thousands of photos. The panel covered how intelligence can apply to marketers, as well as how to make business processes smarter.
Panelists Included (in order as pictured):
• Christa Carone, Former CMO & COO, Xerox and Fidelity
• Paul Lazorisak, VP CRM & Customer Analytics, Talbots
• Stephanie Newby, CEO, Crimson Hexagon
• Dale Renner, CEO, RedPoint Global
SIIA’s Business Information & Media Summit – November 11-13, 2015JEGI is looking forward to sponsoring the Business Information & Media Summit (BIMS) held next month at the Marriott Harbor Beach Resort in Fort Lauderdale. BIMS offers attendees a comprehensive experience in learning from top-level executives and best practices with peers in a rich selection of five tracks of master classes and interactive workshops focused on marketing, data and top-level strategy.
JEGI Co-President Scott Peters will moderate a panel titled “Think Global: New Business Frontiers”, focused on the oppor-tunities and challenges that B2B companies face when trying to make inroads abroad, as well as how to best manage global expansion.
Panelists Include:
• Benny DiCecca, CEO, Wellesley Information Services
• Tom Kemp, Chairman & CEO, Northstar Travel Media
• Greg Watt, President & CEO, Watt Global Media
To register for this event visit: www.siia.net/bims/register-now
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Wilma Jordan Founder & CEO
Tom Pecht Managing Director
Scott Peters Co-President
David Clark Managing Director
Tolman Geffs Co-President
Joseph Sanborn Managing Director [email protected]
Sam BarthelmeDirector
Richard Mead Managing Director [email protected]
Adam Gross Chief Marketing Officer
Amir Akhavan Managing Director
Tom Creaser Executive Vice President
Bill HitzigChief Operating Officer
Jeff Becker Managing Director
BostonCIC Boston
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Phone: +1 (617) 294-6555
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Phone: +1 (770) 932-8700
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London WC2E 9RA
Phone: +44 20 3402 4900
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Artillery Road, Ulsoor Bangalore 560 008
Phone: +91 80 42036793
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Phone: +1 (212) 754-0710
About JEGI JEGI is the leading independent investment bank for the global software, tech-enabled services, media, marketing and information sectors. Over the past 28 years, the firm has completed nearly 600 M&A transactions, serving global corporations, private companies, entrepreneurs and founders, and private equity and venture capital firms.
JEGI’s senior bankers average nearly 20 years of M&A experience and personally lead each client engagement. Through the firm’s broad network of industry contacts and a deep understanding of the markets that its clients serve, JEGI helps technology companies find their optimal strategic paths via exit or growth capital. The firm often identifies and completes transactions with “outside the box” buyers for its clients by leveraging its unique perspective and extensive high-level relationships across diverse markets. For more information, visit www.jegi.com.
Select Recent JEGI Technology Transactions*
*Some of the transactions highlighted above were completed by JEGI Managing Directors Joseph Sanborn and Jeff Becker, prior to joining the firm.
a leading tech-enabled searchand digital marketing agency
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July 2014
a leading event housing softwareand services provider
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October 2014
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an international SaaS platformdelivering omnichannelaudience engagement
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a leading mobile video and brandedcontent advertising platform
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a leading provider of enterprisesecure �le sharing and collaboration
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a cloud-based provider of globalsourcing and collaborative
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the leader in omnichannelcontent creation and delivery
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a leading provider of shoppingand shopper marketingsoftware and services
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a pioneer and leading SaaSprovider of talent analytics toHR and C-level professionals
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a leading mobile app marketintelligence and analytics provider
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a pioneer and leader in mobileentertainment services
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