Why Did TCV Pull Out from Being a Sitecore Investor?
Swedish private equity firm, EQT Holdings has agreed to acquire a majority stake in Sitecore, the Danish customer experience management software company, in a deal that values the company at around 1 billion euros ($1.14 billion). EQT bought the stake from Technology Crossover Ventures and other shareholders. Technology Crossover first invested in Sitecore in 2011. The transaction is expected to close in the second quarter.
Scott Liewehr, the co-host with the CMS-Connected Show and CEO & Co-founder of Digital Clarity Group, uncovered the real story behind the transaction:
As Scott Liewehr clarified during the interview above, even though the headline of the press release announced the deal as a partnership, it is an acquisition, as EQT bought the majority stake. Michael Seifert, CEO and Co-founder of Sitecore, announced the deal in the same way with Scott as well:
"The partnership and acquisition announced today by EQT and Sitecore is specifically designed to sustain Sitecore's profitable growth and scale as Sitecore continues to expand at a rapid double-digit pace," said Michael Seifert, CEO and Co-founder of Sitecore. "We are excited that a world class investor such as EQT will become a critical part of Sitecore's future growth. With EQT and founders as well as management of Sitecore joining forces, we are convinced that Sitecore is set up for continued success in the years to come."
Not a Joke
Although it’s that dreaded time of year again, this is not an April Fools joke! In fact, an EQT spokesperson stated that it would have been 'inappropriate' to wait until next week to come out with the news. Sitecore founders are partnering with EQT on the transaction by rolling significant portion of its equity into new partnership.
Tom Wentworth, Chief Marketing Officer at RapidMiner, pointed out his analysis on LinkedIn and wrote: “This is far and away the best exit for a WCM company. If you add up all the notable acquisitions over the past 10 years or so, combined they are less than Sitecore's deal.”
Sitecore generates revenues of around 200 million euros ($227 million), a EBITDA margin of approximately 25% and the organization has approx. 800 employees across Europe, North America and Asia Pacific. On that note, in July, Sitecore announced their decision concerning workforce reduction globally and between 100 and 150 employees, mostly in Europe, were affected.
EQT has portfolio companies in Europe, Asia and the US with total sales of more than 17 billion euros and approximately 140,000 employees.
What will be the Impact on the Market?
Tony Byrne, Founder of Real Story Group, believes that this deal will presumably have a larger impact on channel partners than end-customers and more pressure on the channel will be noticed to generate more license revenues. That’s why a savvy Sitecore customer will carefully measure their additional investments in the platform.
Byrne also claims that there is a lot of private investor interest in Web Content Management (WCM) right now, so he would not be surprised if Sitecore itself continued to raise additional funds.
Morten Hummelmose, Partner and Head of Denmark at EQT Partners A/S, Investment Advisor to EQT commented on the Sitecore's success: "For several years, we have been following Sitecore given its leading market position, its strong technology offering and its impressive growth story.”
Dominik Stein, Partner and Head of Technology, Media and Telecom ("TMT") at EQT Partners GmbH, Investment Advisor to EQT uncovered the drive behind the decision:
"In close cooperation with management, we want to help Sitecore continue to drive product innovation and expand further into the digital marketing software space. We are convinced that EQT's industrial network and resources can support Sitecore to capture its full potential."
Lars Nielsen, Co-founder and CDO at Sitecore, shared the press release with a post via his personal Twitter account: “I am so proud to team up with EQT and to continue the journey going forward.”
Danica and Sampension, investors in EQT, will co-invest in Sitecore alongside EQT.
An Official Congratulation From TCV
David Yuan, GP at TCV and Sitecore Board Member, has just published a post regarding the Sitecore breaking news through his LinkedIn and Twitter accounts:
“We at Technology Crossover Ventures (TCV) want to congratulate the Sitecore team on this milestone and also express our deep gratitude as partners over the last 4+ years… After three years of researching the category, we gained conviction that Sitecore had the potential to become a category leader. We were fortunate to partner with Sitecore in 2011, and we are proud to have been part of Sitecore’s journey.
The partners at EQT have just invested in a phenomenal company and what we believe to be the next large, global franchise in marketing technology. We congratulate EQT on their investment, and are excited to track Sitecore’s success going forward.”
Yuan also spoke highly about Sitecore and their position by emphasizing: “…not just any platform, but the best in the industry.”
As many analysts agree, this is financially the highest acquisition seen in a long time in the web content management industry. It explains how a strong business model like Sitecore, which has built their company from the ground up, is now being rewarded. On the other hand, it will be intriguing to follow up and see if this is a good or bad decision for TCV in the coming months.