M&A in the Cloud - Plex Online now part of Francisco Partners

Today, Francisco Partners has announced it is purchasing Plex Online from Apax Partners. Francisco Partners is quite familiar with the application software space. Previous investments of theirs have included Primavera (later sold to Oracle), Mincom and Red Prairie. Apax Partners owns stakes in software firms like Epicor and others. Apax Partners purchased its stake in Plex Online six years ago.

Plex Online possesses one of the most widely used and most successful cloud ERP solutions in the market today. The company has an extensive installed base with manufacturers, particularly those firms connected to the automotive industry. Moreover, the company has seen its customer mix continue to evolve to ever larger firms and is routinely considered as a full ERP solution for multi-billion dollar companies.

I spoke with Plex Online CEO, Mark Symonds, today about the deal. He said that this deal is all about execution and growth, especially organic growth of the Plex online business. "Growth is what this whole deal is about", he said. He added that "customers are very pleased about this deal as their software provider is a winner not a rollup candidate. The company will continue to operate as usual. No big changes are planned". Mark added that the company will stay in Auburn Hills, Michigan, their current headquarters, as the Midwest represents a great place to find and retain technology talent.

The geographic expansion of the Plex product line is something I have noticed over the years. The automotive and other manufacturing sectors have clearly gone global and Plex now has customers well outside of its core North American marketplace.

So how will this deal impact the different stakeholders around the Plex ecosystem?

Customers

Customers will likely see little change. The company will remain in Michigan and few personnel changes should be expected. Some executives may, because of the nature of their stock options, want to take their winnings and leave. This should not affect many people though.

I have noticed in previous deals that Francisco Partners has done, they may take a more active role in reviewing the financial and marketing decisions made by company management.

As Mark indicated, this is not a rollup or mash up deal. This transaction, if properly understood by Francisco Partners, is one where growth should be the key value driver. Francisco Partners should help the company into more geographic markets, move more up-market to larger enterprises and to possibly broaden its footprint into additional vertical industries.

All of these point to the creation of an even bigger, stronger application software vendor. And, this means that the ‘investment' that current Plex customers have made into their applications should be safe for several years to come.

Channel Partners/Integrators

Channel partners to Plex should see little short-term change. Over time, expect this deal to attract other potential channel partners and integrators to Plex online though.

As stated above, growth opportunities probably attracted Francisco Partners to do the deal and growth will be the attracting force bringing more channel partners into the Plex ecosystem. Francisco Partners will likely encourage more development of the channel partner ecosystem. Should Plex expand the capabilities of its emerging platform as a service (PaaS), this could further accelerate expansion of the channel and create more competition within the channel partner community.

Competitors

Competitors will be privately upset with this deal while publicly attempting to cast it in a negative light. Because Plex was not sold to a major ERP software company, it remains a fairly potent competitor to emerging cloud ERP solutions. As such, having a deep-pocketed venture backer like Francisco Partners, makes Plex Online even more of a competitive threat.

Competitors will likely try to incite FUD (fear, uncertainty, doubt) about the deal. I can already anticipate some vendor will try to spin this in the most negative of fashion. However, liquidity events among private equity/venture capital firms are actually quite common and a necessary part of the business world. A liquidity event involving Apax Partner's ownership has been anticipated for some time in the marketplace. The question was always when and to whom. The fact that Plex will not be smashed into a massively larger firm with its piece parts put on the shelf or neglected for years to come, will be a good thing for customers. With the fate of so many acquired software companies often so much in question, this particular outcome may be one with great short-term clarity.