Climb Advisors Weekly M&A Deals Newsletter

Climb Comment: Highly strategic deal by Tqulia Automation to niche down and acquire a leading player in the healthcare vertical. Element Blue's twenty years experience in the sector offers acquirer immediate scale and leadership in one of the most attractive sectors. Healthcare systems are constantly under pressure to achieve great efficiency and improve patient outcomes - two areas that automation can deliver. It's clear that the combined entity is charging forward to capture market share with Tquila Group Chairman, James Mc Hugh stating the deal positions "the combined businesses for super charged growth over the next 24 months". We know the team at Tquila Group well and congratulate them on the successful transaction.

Climb Comment: Valstone is a relatively new vehicle spun out of Valsoft to focus specifically on the industrial tech vertical. Both groups have been active lately with Valstone acquiring Henning ERP software in May, and Valsoft announcing three acquisitions in September - Fusion, ICL & JBL. All these acquisitions are focused broadly on the industrial space with JBL falling into the ERP category, ICL in supply chain management and Fusion focusing on data management within manufacturers.

A few interesting things here - first off have to be impressed by the level of activity out of the Valsoft group. Their ability to deploy capital on strategic opportunities in a challenging market speaks to their capabilities and commitment to growth. Secondary to this we have to assume that some of these acquisitions have been in the pipeline for a while, and though a small sample size, this may point to an increased willingness of sellers to transact coming into the end of this year.

Looking specifically at these deals we see the broad vertical interest in industrial software, an area Climb knows well. The transformation of legacy manufacturers to the digital age is happening everyday and it is taking a long time to actualize. Smart buyers still see a tremendous opportunity to modernize the operations of these types of businesses. Niching down a bit to look at Matrix specifically we see a business that sits at the intersection of process control and compliance. Food is a highly regulated industry and having tech-driven solutions in place to manage recalls, product traceability and recipe management is key. These sort of solutions are much more of a ‘must-have’ than a ‘nice-to-have’ for operations of any scale. Expect to see more announcements from Valstone in this field.

Climb Comment: Excellent strategic acquisition here. Actionstep has positioned itself as a leader in practice management for legal firms with some capabilities in accounting, whereas Soluno has specifically focused on providing top-tier accounting software. Integrating the products into a unified platform puts Actionstep deeper into the org at practice customers. It’s likely that there will be integrations built in later phases which will tie billing and reporting directly into the practice management platform, enabling customers to analyze the ways that specific business actions impact the bottom line.

Actionstep has been active lately in M&A with their acquisition of Australian legal practice management software companies FilePro in September 2023 and LawMaster in September 2022. These PE backed rollups often look to both ‘buy features’ and ‘buy revenue’ in parallel, adding accretive revenue on day one and working over the mid-term to integrate newly acquired features, and unify architecture to combine best features across the existing and acquired platform.

Climb Comment: Nice add-on here. KKR invested in Apexanalytix in July 2022 and this marks their second add-on this year after buying ESG Enterprise in March. Apexanalytix shows 400+ employees on LinkedIn and is building a comprehensive platform around supply chain risk. Darkbeam’s focus on cyber risk is a key piece of the total risk landscape. Large companies find it critical to understand their vendor's vulnerability to cyber attacks and the impact of that specific risk profile in relation to the ongoing operations of their business. Johnson Controls suffered a cyberattack just this week that led to major service disruptions. The message from the hackers read:

"HELLO dear Management of Johnson Controls International! If you are reading this message, it means that: your network infrastructure has been compromised, critical data was leaked, files are encrypted, backups are deleted."

The note went on to say, "The best and only thing you can do is to contact us to settle the matter before any losses occur." -- not something anyone wants to wake up to!

Preventative risk management is key and will become increasingly baked into operations at major corporations. Darkbeam makes an excellent sales tool for Apexanalytix to show value across the customer org in ascertaining protection of operations.

Climb Comment: Procurement is one of those fields that is surprisingly lower-tech than many would imagine. Lots of products are moving worldwide on the backs of phones, pencils & paper, and faxes. As large companies look to streamline operations and reduce costs they increasingly turn to marketplace type solutions that offer single-pane view of opportunities, side-by-side view of various suppliers and contracts, and built-in tracking/workflow capabilities.

PlanetBids has a focus on serving local governments and municipal departments - as we called out last week this end market is highly attractive to buyers based on the large universe of opportunities and the generally sticky nature of the vertical. Capstreet installed a new CEO with the acquisition and is no doubt looking to scale and build on the success of the founding team.