E-Sourcing Forum » That great sucking sound you hear

That great sucking sound you hear

September 24th, 2007 at 05:12am David Bush - Iasta

(caused by NAFTA), was just supplemented by a new acquisition close to the border in Austin, TX. (I know, the money isn’t going to Mexico, but it was the best I could come up with). Last week, while all the noise about Procuri was at full throttle, Nextance went out and made one of my direct predictions golden!

I am not sure what to make of the acquisition, since it is not even mentioned on the company websites. Is it really that ho-hum, except for a little talk on Spend Matters? I don’t even know very much about Versata (formerly Trilogy), or why they took interest in Nextance. Based on their own description:

Versata partners with corporate IT departments to enhance and simplify critical operations, with a persistent focus on decreasing spending enterprise wide. Versata’s patented solutions cut IT expenditure by reducing hardware and associated maintenance, leveraging open source technology, and accelerating value delivery to business customers. As one of the only companies in the industry with a focus on total cost takeout, and with technology to back our claim, Versata has established a reputation as a true ally to the Information Technology department.

Within the press release, I notice some interesting details that normally are hidden from public announcements.

A “quote” from Nextance CEO, Kyle Bowker,”By joining the Versata family, we secure Nextance’s long term viability and ensure our continued commitment to leading products in an increasingly competitive space.”

That sounds really warm and fuzzy, but I read that as a distressed final move by Nextance. I could be wrong, but they burned through a lot of cash and this might have been all that was left to salvage shareholder value. By “securing long term viability” with Versata, does that infer that they would not have been able to otherwise?

Versata will consolidate Nextance’s operations at the Austin headquarters while ensuring seamless support for customers.

That sounds like a full blown take over and only a handful of critical employees will be asked to move to Austin. It also sounds like Versata is saying, “Thanks, we’ll take it from here.”

In all likelihood, this was a dirt cheap acquisition of very solid and highly leveraged technology, by a company that has shown the ability to deliver on multiple platforms. I can’t say I am surprised by it.

Entry Filed under: Contract Management, General, e-Sourcing Marketplace

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1 Comment Add your own

1. Eric Strovink | September 24th, 2007 at 10:23 am

When acquisitions add new capability, such as the acquisitions by Emptoris of Zeborg and DiCarta, they’re smart acquisitions. When acquisitions are made as part of a speculative roll-up strategy, or when an acquisition of wholly redundant capability is made (as with Ariba’s acquisition of Procuri), one has to ask more pointed questions.

From the acquiree’s perspective, an acquisition often makes sense only if the company has failed and needs rescue (as was the case with Zeborg) or if the acquired company’s investors want to cash out. In the latter case, investors can force an acquisition even if that appears to be a short-sighted strategy (this was brought up by several commenters during the blog discussions on Ariba-Procuri).

When acquiree companies are both highly profitable and controlled by investors with a long-term view, a disruptive acquisition is much less likely to occur. And, if it does occur, such an acquisition is likely to be a smart acquisition that brings benefits to both companies as well as to their customers.