Insight Venture Partners is taking E2Open (EOPN) private in a $273 million transaction (ht to Jason Trevisan). E2open, as loyal readers know, started as a consortium of electronics manufacturers. EOPN built a supply chain network for that industry (and others) as well as related applications. Insight cited the network as one reason for buying the company.
This transaction had me thinking about other public enterprise software companies with networks that might also be candidates for a buyout. With some public B2B tech valuations a bit muted, and venture money plentiful, it could happen. Networks take time and money to build. Perhaps VC and PE firms who understand these businesses are more patient than public investors? The value proposition of such buyouts is only aided by the material savings of being private.
Buyout candidates might include:
- Covisint (COVS) has a network in the auto industry and is trying to break into the healthcare space. Covisint’s stock price has fallen more than 70% this year. The stock sells for 2x cash and about book value. Total market cap is now under $90 million and the company has $41 million in cash. (I don’t own any COVS but am considering buying some.)
- Liquidity Services (LQDT) has a built a network/platform for selling surplus equipment and surplus retail goods. Loss of a substantial government contract as well as a key private client clobbered the stock this year, cutting it in half. It now sells for an EV/Revenue ratio of 0.4 and 3x EBITDA. (I do own some of this.)
- Sciquest (SQI) is less of a network play, but has a bit of that element. SQI has seen its stock cut in half over the past year as well. SQI is still not nearly as cheap as COVS or LQDT. Interestingly, SQI was public, then private (Trinity Ventures), now public again. (I do not own any SQI.)
Here’s a chart of the performance of these stocks, including EOPN, over the past year relative to the Russell 3000 Index. Happy speculating!