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- Climb's M&A Weekly: Leonard Green backed ECI makes acquisition
Climb's M&A Weekly: Leonard Green backed ECI makes acquisition
ECI Software continues to build out their manufacturing software division and Hugging Face strikes their largest deal to date
Nick @ Climb
August 11, 2024
Welcome to Climb Advisor’s weekly deal newsletter highlighting transactions announced last week across the B2B tech landscape.
Climb Advisors is an M&A and credit advisory firm focused on B2B software and services companies in the range of $5m to $100m+ 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.
Leonard Green & Partners backed ECI Software Solutions continues to grow by adding ProfitKey
Overview: ECI Software Solutions, a global provider of cloud-based business management software and services, acquired ProfitKey, an ERP platform for discrete manufacturers. ProfitKey’s team will join ECI’s largest business unit, their manufacturing division, post acquisition with the acquirer continuing to build out their portfolio of software to help small and medium sized businesses in construction and manufacturing. Read more here.
Climb Comment: ECI’s deal for Treetop, which previously appeared in our newsletter, marked their first venture in Europe. This announcement sees them return to the North American market, acquiring ProfitKey, an ERP platform designed for discrete manufacturers. ERP software is one of the most attractive acquisition targets given the stickiness of the revenue. We expect ECI to leverage ProfitKey’s existing customer base to cross-sell services.
Hugging Face acquires XetHub in their biggest deal to date
Overview: Hugging Face is acquiring XetHub and their software which helps developers manage files created as part of AI projects. XetHub’s tech will be integrated into Hugging Face’s open-source platform which is used to build applications using machine learning technologies. This announcement follows on from a Series D round last year which valued the acquirer at $4.5B and included notable names such as Google, Nvidia and Intel. The amount of this particular deal remains undisclosed but it is understood to exceed the $10M they spent on Argilla in June. Read more here.
Climb Comment: Founded in 2016, Hugging Face is one of the pioneers in this AI age and its platform allows companies and individuals to share AI models that others can use. It wants to be the “Github for Machine Learning models”. In addition to the technical talent + products, we expect that this acquisition along with Argilla are part of its strategy to drive increased commercialization in the business given both companies have existing enterprise customers.
Celero Commerce to acquire Canadian-based SONA
Overview: Celero Commerce, a Nashville based financial services company which offers payment processing services, business management software and data intelligence to SMBs, acquired SONA, a complementary company north of the border. SONA offers tech payment solutions to small and medium sized merchants across Canada, primarily through partnerships with credit unions and independent software vendors. Read more here.
Climb Comment: Celero Commerce has been growing rapidly over the past couple of years - it is a top-ten non-bank processor of electronic payment transactions in the world - and will maintain this growth through this highly strategic acquisition. SONA offers a platform to expand into the Canadian market and utilize Celero’s existing successful playbook in a new market through their core distribution channels.
Brighton Park Capital backed OPSWAT adds InQuest
Overview: OPSWAT, a leader in critical infrastructure protection, announced a deal to acquire InQuest at this week’s annual Black Hat USA cybersecurity conference. Based in Austin, InQuest has made a name for itself as a provider of cyber protection and threat hunting solutions for Department of Defense customers. The two companies have worked closely together since their initial partnership in 2013, with this move set to accelerate OPSWAT’s expansion into the federal market. Read more here.
Climb Comment: From the outside looking in, this appears to be a deal that was a long time in the making given the two companies’ strong ties over the past 10+ years. This is something we see a lot of in our deals: sellers typically know who the likely acquirers will be and we always guide sellers to strengthen partnerships with these strategic potential buyers well, i.e., years, in advance. This is a good deal for both sides and OPSWAT will accelerate its go-to-market strategy for the attractive federal market, where InQuest is strong.
LA based Dysrupt acquires Half Past Nine
Overview: This highly strategic deal sees paid media agency Dysrupt acquire Half Past Nine, a specialized growth marketing and strategy services firm. By making this move, Dysrupt is able to increase what they can offer in consulting and media execution, whilst also expanding into new verticals. By coupling their experience in entertainment and consumer with Half Past Nine’s expertise in healthcare and SaaS, Dysrupt can now begin to establish a presence across both consumer and business-to-business marketing. Read more here.
Climb Comment: The marketing agency space has been especially active over past ~18 months. Here we see Dysrupt acquiring an agency that augments their existing offering (in growth marketing and strategy) while also providing deep expertise in two verticals (tech/SaaS + healthcare). Growth marketing and strategy have been one of the more profitable segments of marketing agencies given they are typically longer term contracts and higher margins.
It’s a space we know well and have advised on 3 deals there recently with more in the pipeline. Reach out to me if you are looking to buy or sell.
Article of the week
As you know, Climb Advisors is focused on lower middle market software transactions and we have covered a number of AI transactions recently.
At the extreme frothy end of the AI market, we have seen a couple of major acqui-hires with MSFT / Inflection deal, AMZN / Adept and then last week GOOG / Character AI. The structure of these transactions is unusual and we highly recommend Matt Levine's superb piece on them here.
Thanks for following along & hope you found something useful or interesting.
All the best,
Nick