Over five months into the pandemic, I hope you and your families remain healthy and safe. Despite a challenging environment, here are two notable M&A transactions in our space worth highlighting (others are listed below):
- Talkdesk received $143 million in Series C funding valuing the company at $3 billion. The company was founded in 2011!
- TTEC Digital, LLC agreed to acquire VoiceFoundry (a company that specializes in the design and delivery of Amazon Connect, a cloud-based enterprise contact center solution) for $67.2 million
As for the broader M&A space, after a dramatic reduction in deal volume in Q2, I am encouraged by the recent uptick in deal flow. According to GF Data’s M&A Report, there has been little change in valuations on reduced volumes and less debt usage to finance deals. According to the same publication, some of the common elements that allowed deals to get completed in Q2 were:
- Investment propositions fully digested by the buyers pre-covid
- Industry segments with decent visibility through the pandemic
- Sellers with leverage to resist price re-trading with the advent of the pandemic
- Buyers willing to employ more equity than in the past to reach close as the debt markets dried out (total debt averaged 3.3x TTM EBITDA in Q2, reflecting a drop from 3.8 – 4.0x range from 2017 through Q1’20)
As deal flow hopefully improves and stabilizes over the next few quarters, we expect the pandemic to have an impact on how businesses are assessed during due diligence for both financial and non-financial items. Since most industries have been impacted by the pandemic, it will be interesting to see how buyers incorporate non-recurring, unusual expenses incurred as a result of the pandemic (operating inefficiencies, shut-down related costs, severance etc.) to derive a normalized EBITDA (a key metric for business valuation) and incorporate that in their valuation models. Buyers may be willing to be more generous with their assumptions on what constitutes a normalized EBITDA in competitive deals compared to ones that are less so. On the non-financial side, buyer would be zeroing-in on management team’s response and preparedness to the pandemic and their efforts to return to normal.
What I am reading? The Forrester WaveTM: Contact-Center-As-A-Service(CCaaS) Providers, Q3, 2020 released on Aug 26 – While Nice inContact, Genesys, Talkdesk and Five9 led the pack, the one line that stood out for me was
whereas in other enterprise markets the transition to software-as-a-service (SaaS) is largely complete, it’s only at 33% of overall revenue in this (contact center) market. This slower conversion to SaaS creates openings for newer, disruptive vendors, such as Amazon Web Services.
If the pandemic is expected to accelerate trends already underway, does the transition to the CCaaS model and away from on-prem get accelerated in a meaningful way in the foreseeable future.
Regards, Mono
Mono Bhattacharya
Partner
O: 513.229.9042 | M: 513.284.8355
E: mono@rkca.com | www.rkca.com
1077 Celestial Street | Cincinnati, OH 45202
BPO / CX Software M&A Update
TTEC Signs Agreement to Acquire VoiceFoundry
August 2020 – TTEC Holdings, Inc.(NASDAQ: TTEC) a leading global Customer Experience as a Service (CXaaS) partner for many of the world’s most iconic and disruptive brands, has agreed to acquire VoiceFoundry, a global partner of Amazon Web Services, creating an end-to-end CX delivery solution for Amazon Connect. The acquisition not only adds Amazon Connect to TTEC’s Humanifytm CX Marketplace, but it also extends TTEC Digital’s Humanifytm Cloud Integration and API platform to AWS, providing TTEC customers and prospects with cloud contact center optionality and a unified per user per month (PUPM) offering for access to over 50 enhanced CX applications to complement AWS’s services. VoiceFoundry is an industry leader in deploying Amazon Connect as well as other AWS services that focus on creating intelligent interactions across all engagement channels. VoiceFoundry is uniquely focused on helping large enterprise clients improve customer engagement while maximizing the benefits of AWS at scale. The acquisition adds 50+ blue chip companies to TTEC’s global account base, primarily in the public sector, e-commerce, financial services, travel, healthcare, and insurance industries.
Recent Acquisitions:
- Serendebyte, 2020
- Strategic Commications Services, 2018
- iKnowtion, 2016
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Talkdesk Raises $143M in Series C Funding
July 2020 – Talkdesk, Inc recently announced that it will receive $143M in funding in Series C Funding. The company will use the proceeds to capitalize on its current momentum and continue its global growth, to increase research and development spending and to invest in go-to-market, sales, marketing and channel development as it continues to expand up-market. The transaction included participation from 13 investors including new investors Franklin Resources, Inc. (NYSE:BEN), Willoughby Capital Holdings, LLC, Skip Capital, Lead Edge Capital Management, LLC, Top Tier Capital Partners, LLC, existing investors Viking Global Investors LP, and Threshold Ventures. The round is raised at a post-money valuation of more than $3B and the comapny has raised over $268M in funding to date.
Talkdesk, Inc. develops and provides browser-based call center software solution for small businesses. The company provides Cloud Contact Center Software, an end-to-end solution for customer engagement, workforce engagement, enterprise collaboration, AI and knowledge, and analytics.
Endurance International Group Holdings, Inc. (NasdaqGS:EIGI) completes the acquisition of Retention Science Inc.
August 2020 – Endurance International Group Holdings, Inc. (NasdaqGS:EIGI) has acquired Retention Science Inc. for approximately $35 million. Retention Science Inc. has annualized revenue of approximately $8 million. Retention Science Inc. operates an automated SaaS marketing platform that allows users to profile and predict customer behavior and send the right message at the right time. The company enables clients to profile and predict customer behavior by analyzing behavioral, transactional, and demographic data; and keep their customers engaged and purchasing by delivering relevant and timely messaging.
Recent Acquisitions:
- Ecomdash, 2019
- WZ UK, Ltd, 2016
- AppMachine BV, 2016
- Constant Contact, 2016
ConvergeOne Holdings, Inc. completes the acquisition of Altivon
August 2020 – ConvergeOne, a leading global IT services provider of collaboration and digital infrastructure solutions, has acquired Altivon, a premier contact center solutions provider. This acquisition further solidifies ConvergeOne’s position as a leading provider of collaboration and IT-enabled solutions in the market today. Founded in 1989, Altivon delivers high value, high impact contact center solutions that elevate the customer experience, including solution design, deployment, support and ongoing improvement services. As a Genesys Gold Partner, Altivon provides services exclusively for the full portfolio of Genesys premise and cloud offers. As a result of the acquisition, Altivon is now Altivon, a ConvergeOne Company.
Recent Acquisitions:
- AdvanTel, 2018
- Arrow Systems Integration, 2018
- Forum Merger Corporation, 2018
- Alexander Open Systems, 2017
ServiceNow, Inc. (NYSE:NOW) signed an agreement to acquire Sweagle.
June 2020 – ServiceNow, Inc. (NYSE:NOW) signed an agreement to acquire Sweagle on June 22, 2020. ServiceNow expects to complete the acquisition at the beginning of third quarter 2020. Sweagle is a SaaS platform that intelligently validates, manages, and secures configuration data. The company is headquartered in Kampenhout, Belgium. The transaction will extend ServiceNow’s DevOps and IT Operations Management (ITOM) capabilities, giving customers the ability to leverage machine learning to prevent potential misconfigurations from causing outages in production and speeding up remediation. Along with its DevOps and IT Operations Management Health solutions, Sweagle will help accelerate ServiceNow’s Service Graph roadmap by managing configuration data for public and private cloud environments and modern application architectures, like microservices, containers, and serverless computing.
Recent Acquisitions:
- PassageAI, 2020
- Loom Systems, 2020
- Fairchild Consulting Services, 2019
- MonetDB Solutions, 2019
- Cloud Elements, 2019
Cognizant Technology Solutions Corporation (NasdaqGS:CTSH) completed the acquisition of Collaborative Solutions, LLC.
June 2020 – Cognizant Technology Solutions Corporation (NasdaqGS:CTSH) entered into an agreement to acquire Collaborative Solutions, LLC for approximately $390 million on May 5, 2020. Consideration include preliminary purchase price of approximately $385 million, excluding contingent consideration. Under the transaction, Collaborative Solutions’ team will be added to Cognizant. The transaction is subject to the satisfaction of certain closing conditions, including regulatory clearance. As of May 19, 2020, the transaction was approved by Federal Trade Commission. The transaction is expected to close in the second quarter of 2020. Cognizant Technology Solutions Corporation (NasdaqGS:CTSH) completed the acquisition of Collaborative Solutions, LLC on June 11, 2020. Collaborative Solutions, LLC provides strategic consulting services, program management, technology integration, and operational support services. Collaborative Solutions has more than 1,000 employees worldwide who will be joining Cognizant as a result of the transaction.
Recent Acquisitions:
- Lev, 2020
- Code Zero, 2020
- Contino Solutions, 2019
- Zenith Technologies, 2019
- Meritsoft, 2019
Zoom and ServiceNow Partner to Make the Best Work-Anywhere Experiences Even Better
July 2020 – Zoom Video Communications, Inc. and ServiceNow announced a commitment to each other’s technology solutions to make work-anywhere experiences work even better. With the ongoing pandemic and shelter in place orders Zoom’s usage rocketed to 300 million daily meeting participants in April 2020.
Zoom deployed ServiceNow’s Customer Service Management (CSM) to scale its customer service operations and enable critical communications capabilities for its global community. ServiceNow CSM also provides proactive case management and personalized self-service options to help manage the influx of customer requests. In addition, Zoom will deploy the Now Platform, including new AIOps capabilities, to enable its new Hardware as a Service (HaaS) business model.
Taheebo Holdings LLC acquired a 15.75% stake in Atento S.A. (NYSE:ATTO) from Atalaya Luxco Pikco S.C.A.
June 2020 – Taheebo Holdings LLC entered into a share transfer agreement to acquire a 15.75% stake in Atento S.A. (NYSE:ATTO) from Atalaya Luxco Pikco S.C.A. on May 6, 2020. Taheebo Holdings LLC will acquire 11.212205 million shares in exchange of PIK notes. Transaction is subject to fulfillment of some regulatory requirements. Taheebo Holdings LLC completed the acquisition of a 15.75% stake in Atento S.A. (NYSE:ATTO) from Atalaya Luxco Pikco S.C.A. on June 24, 2020. Atento S.A., together with its subsidiaries, provides customer relationship management, and business process outsourcing services and solutions in Brazil, the Americas, Europe, the Middle East, and Africa. It offers a range of front and back-end services, including sales, customer care, technical support, collections, and back office, as well as applications-processing and credit-management. The company was formerly known as Atento Floatco S.A. Atento S.A. was founded in 1999 and is based in Luxembourg.
Atento Recent Acquisitions: Keepcon, 2017
Sources: GF Data, CapitalIQ, Company Websites, The New York Times, Forrester, PR Newswire
