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Climb Advisors Weekly M&A Deals Newsletter
The Week in Review
Nick @ Climb
December 17, 2023
Welcome to Climb Advisor’s weekly deal newsletter highlighting transactions announced last week across the B2B tech landscape.
Climb Advisors is an M&A advisory firm focused on B2B software and services companies in the range of $5m to $50m+ enterprise value. We guide CEOs and business owners through the process of selling their business & assist investors in sourcing & closing great deals. We love to talk markets and share beneficial information - please reach out any time.
Formstack, backed by PSG Equity and Silversmith Capital Partners, acquires Formsite
Overview: Boston based Formstack provides a set of no-code solutions to help technical and non-technical users manage data and automate workflows. They have recently expanded their data capture capabilities to include document creation, management and eSignature capture, and this deal expands capabilities in this area. Formsite allows users to build online forms, surveys, questionnaires and polls to capture data. Read more here.
Climb Comment: Great deal here in low-code/no-code. Formstack, backed by PSG & Silversmith, is a true enterprise automation platform and here adds deeper capabilities around forms creation. Formsite lauds drag & drop builder capabilities, secure submissions, the ability to process payments, and more. Especially impressive as they’ve been bootstrapped since inception in 1998.
Low-code platforms tend to expand further out into workflow automation & app building, often getting more technically complex for users in the process. Formstack appears to be building those capabilities while also leveraging deals like this to offer deeper coverage into the evergreen niche of form creation.
Genstar Capital backed Prometheus Group announces deal for MobilOps
Overview: Prometheus has announced a deal to acquire MobilOps, a Baton Rouge-based provider of plant management and field operations software, from Turner Industries Group. Their platform helps clients manage and leverage data to reduce costs, increase safety and stay compliant. The Raleigh based acquirer already provides a wide range of enterprise management solutions with this latest move bolstering their industrial maintenance software offerings. Read more here.
Climb Comment: Prometheus, backed by Genstar, is a mid-market standout in EAM/Field Services software, having acquired more than a dozen software businesses in the space of the last decade or so. These are solutions which provide the tech (employee scheduling, planning, ERP, HSE, etc) to run capital & labor intensive projects in oil & gas, mining, construction and more.
MobilOps appears to have been built in-house by Turner Industries, an industrial services group that specializes in major improvement projects on oil refineries along the US Gulf Coast. Turner’s bread-and-butter is in sending out welders, engineers, and skilled labor out to work on complex and regulated projects, and along the way they built software to work more efficiently.
Often when solutions get built this way - for a specific use-case within a non-tech parent org - they have rock-solid product fit & a thoughtful feature mix but are underinvested on the UI/UX side. Prometheus is well positioned to give any refresh needed and sell into a large existing base of aligned customers.
Perion Network enters digital out of home (DOOH) advertising space with acquisition of Hivestack
Overview: Perion Network Ltd. (NASDAQ and TASE: PERI) is a multi-channel advertising company, connecting clients to consumers through channels such as search advertising, social media, video and connected tv. They’ve just acquired Hivestack, a software platform to facilitate the buying and selling of DOOH advertising such as screens and billboards at venues like airports and gas stations. The deal will see them pay $100m in cash up front, with up to an additional $25m in cash and equity structured as a three-year employee retention and performance-based payment plan. Read more here.
Climb Comment: Interesting one in adtech, lots to unpack here. Perion provides a range of programmatic advertising solutions - mostly focused around search/publisher display, with increasing moves into video across channels. Hivestack is focused on DOOH (digital out of home) - powering some of the ads you might see on screen while you’re pumping gas or flipping through the iPad menu at the airport bar (thanks a lot Hivestack!). Their tech provides advertisers a way to deliver targeted ads into the physical world and track results.
Looking at the financial aspect of the deal - worth calling out that Perion has been growing and adding cash, doubling revenue from 2020 to 2023 and amassing a war chest of $430m at the start of ‘23. They financed this deal off the balance sheet & add $45m in revenue; looking at this ex-TAC (traffic acquisition cost) it’s $33m. In adtech TAC is seen as a passthrough cost, so call it a 3x on net revenue, not bad. Perion is targeting Hivestack to grow at a 40% CAGR over the next three years and generate $212m aggregate ex-TAC revenue at a 26% ebitda margin in order to cash in a $25m earnout. Aggressive targets and material payout - you love to see it.
Cherry on top of this deal is that Perion gains access to Hivestack’s exclusive partner channel into Japan - delivering 1.2 billion monthly impressions to an affluent & high-tech consumer market.
Gryphon Investors backed Ncontracts acquires Quantivate
Overview: Ncontracts provides solutions to the financial services industry based around managing overall risk, third party service providers and staying compliant with the increasing regulations placed on lending and other facets of the sector. Their offerings just received a boost in the form of Quantivate, a provider of similar solutions specifically to banks and credit unions. Based in Washington with a team of 57 employees, Quantivate also has applications for managing policies, documents, complaints and issues. Read more here.
Climb Comment: Ncontracts deepens relationships into the credit union market and adds features, revenue, and team with this deal. We’re seeing consolidation every week it seems in the risk management sector, and credit unions remain an interesting customer vertical for a number of investors.
Rithum starts a new chapter with the acquisition of of Cadeera
Overview: CommerceHub is now Rithum - the retail software provider announced a major rebranding alongside a deal for Cadeera, an AI-powered product search platform. Rithum allows retailers to find, list and ship merchandise not stored in their own warehouse that complement their products, whilst the suppliers see a significant ease in their logistics operations. Clients can also create and increase the effectiveness of e-commerce ad campaigns, further fueling the acquirer’s need for increased AI capabilities. Read more here.
Climb Comment: Rithum helps 40,000 of the world’s largest retailers move more than $50B in merchandise each year via what could be described as an enterprise drop-shipping platform. Customers see a seamless checkout while in the back-end Rithum locates & secures third-party products and incorporates them into the logistics flow.
Cadeera is an AI-powered product recommendation engine, and it fits well alongside these capabilities. Think of the ‘you may also like’ section on Amazon - Cadeera enables retailers to run a robust version of this natively on web and combined with Rithum’s view into a huge global catalog should be able to generate incremental spend across the customer base, not to mention the vast amounts of training data it will be able to ingest and use to improve recommendations.
Highlights of the week
I enjoyed the Lex Fridman podcast with Jeff Bezos. While it was mainly about Blue Origin and space exploration (an area I am not too familiar with!), I found his comments around the importance and benefits of ‘wandering’ interesting, particularly as we approach year end. He talked about it the context of meetings, time generally, and even life, but as we approach year end and have more time to reflect, I think it can be a useful tool for us to review past year and plan into 2024.
Lastly, great to see our friends at SVB (under First Citizen’s Bank now) back in business. For CEOs and founders reading this, here they outline how venture debt can help your business grow. It’s a product that we have been hearing alot of questions about over the past year or and we plan to make an announcement ourselves about it in 2024. Watch this space!
Thanks for following along & hope you found something useful or interesting. We’ll be back next week with more deals.
All the best,
Nick