BPM Software Vendor Buying Spree continues with Savvion being acquired by Progress Software Corporation

By brian | January 11, 2010 | Open Source

The BPM land grab continues.   For those that follow me on EbizQ and other sites, you might remember that I was probably the first in the BPM and Workflow Industry to predict that the IBM acquisition of Lombardi would set off a small BPM Software and Workflow Software Vendor buying frenzy in 2010 as other large software vendors look to stake claims in the deservedly hyped BPM/Workflow space (See my original prediction here).

Of course, I drink my own coolade, I just didn’t think it was this highly concentrated.   It is an understatement to say that both VCs and Industry Execs have a herd mentality.  Of course they do.  This is for obvious reasons – some good and some bad.  There is a feeling of safety in numbers and there is a general belief of the wisdom of the herd in venture investing.  Furthermore, most VCs worry about the market health first, executive team second, and then the strength of a particular product suite third.  In other words, if the market is good, VCs will continue making bets on it and not necessarily all in the same company.

So, what does this second major BPM company acquisition announcement in less than 30 days mean?  Well, let’s look at the numbers.  In the case of this acquisition, we’ve got a publicly announced price tag – $49 million.  There isn’t a BPM CEO on the planet tonight that isn’t trying to calculate multiples based on Savvion’s revenues and profit margins.  Every industry needs benchmarks to know how to value companies in that particular industry.  Now we’ve got two cases (albeit Lombardi’s is still unknown) and two sets of possible metrics.

I’m sure in the next couple of days we will get some good clarity on Savvion’s exact numbers.  However, in the announcement by Progress Software, they claim that Savvion had 350 customers (and 24 Fortune 100 customers).

According to a write up by Timothy Prickett Morgan, he calculated Savvion revenues at around $18 million, i.e. 2.7x annual revenues, based on a revision in sales forecasts by Progress Software.   Tony Baer seems to suggest the acquisition was a 1.5x multiple in his column.  Other writers suggest that Savvion was growing very slowly during recent years and either in or near red numbers.

Funny, if we look at a product brief by Upside Research published in 2007, it claims that Savvion had $25 million in Revenues and 25 Fortune 100 customers in 2005.  What – something does not add up?  Was Savvion just taking the piss out of Upside and its readers back then? Or did Savvion undergo a serious erosion in their business model?  I have to assume it is mostly the former (which will raise some eyebrows and require Upside Research to do some fast explaining).

So, here is my initial conclusion and comparison of the back to back acquisitions.  IBM acquired a strong and growing market Leader probably paying 5-8x revenues.  Saavion was probably a more desperate sale of a company that despite a booming market was starting to stumble and lose its way.  The business was probably being shopped to strategic buyers who realized that Savvion would nicely fill out their customer strategy and allow them to participate more fully in a very extended and still not very “neat and contained” market.  So, Savvion probably felt that they were getting a nice bounce thanks to the market and a renewed chance as a company inside a larger entity instead of one that would be going it alone in a quickly changing landscape.  Some cash and some stock options in the new company probably looked like the best way to keep moving forward.

This brings me to my next blog (coming in the next few days!) regarding how BPM acquisitions will continue but may have less to do with BPM and more to do with complex customer acquisition strategies and more holistic product ecosystems.  But, I’ll get some sleep and leave that one for later this week.