From SCDigest's On-Target e-Magazine
- Sept. 5, 2013 -
Supply Chain News: More Consolidation in the Procurement Software Space, as SciQuest to Acquire CombineNet
CombineNet Brings Advanced Technology, High Profile Customers and New Sectors to Much Larger SciQuest
SDigest Editorial Staff
As with every area of supply chain technology, consolidation in the procurement space continues as well, with news this week that SciQuest has acquired CombineNet.
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"That seemingly high price should be considered in the context of the 22 patents SciQuest also acquires in the deal, most involving complex sourcing algorithms." |
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What Do You Say?
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Both companies are relatively small in the grand scheme of the supply chain software industry, but also influential. CombineNet, for example, despite revenues of only about $12 million, has customers that include Procter & Gamble, RiteAid, Coca-Cola, ArcelorMittal, Macy's, Parker Hannifin and other large companies. It has about 100 customers in total.
SciQuest, conversely, is more focused on indirect procurement for non-manufacturing companies and institutions such as universities. Combined, it will allow SciQuest to offer a more complete set of solutions and address a wider market.
SciQuest, based in Cary, NC, is a public company with revenues of about $66 million in 2012. But is has been growing rapidly. In Q2, SciQuest reported GAAP revenues of $21.2 million, compared to $15.2 million in the second quarter of 2012. It expected to see revenues of around $85 million for 2013 before the CombineNet acquisition.
The deal for CombineNet was valued at $43 million, or about 3.5 times CombineNet's current revenue run rate.
That seemingly high price should be considered in the context of the 22 patents SciQuest also acquires in the deal, most involving complex sourcing algorithms.
"There is actually no overlap,” between the solutions of the two companies, says SciQuest CEO Steve Wiehe. "By offering the full package, combining CombineNet’s technology with what SciQuest already has in regards to spend-management software, SciQuest will uniquely fill the entire void - a void typically filled by combined installations."
Weihe is referring to analyst research that has shown many companies have two or more procurement-related software vendors to meet different functional needs.
(Sourcing and Procurement Article Continues Below)
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 Of course, the big acquisition in the procurement software area in recent years was SAP's $4.2 billion dollar acquisition of rival Ariba in May of 2012. SAP has since largely let Ariba operate as if it were still an independent company.
IT giant IBM entered the procurement software game in with its acquisition of Emptoris, also in 2012.
Other leading procurement software providers include BravoSolution, Iasta, Oracle, and GEP, among many smaller vendors.
Weihe said SciQuest intends to keep most of CombineNet's 80 Pittsburgh-based employees.
Says SCDigest editor Dan Gilmore: "On the surface, this looks like a very smart deal. CombineNet's technology and customer base certainly has the potential to drive a lot more than $12 million in annual sales. Butl lots of software acquisitions look good on paper. The key is always smart integration and focused execution."
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