Byline: Andrew Dietderich
A dozen mergers and acquisitions involving Southeast Michigan tech companies have taken place since October, fueled by increased tech spending that industry professionals said will continue.
The result, said Seema Chaturvedi, managing partner of the Troy-based Accelerator Group, will be a further shakeout of companies looking to expand or exit as both buyers and sellers look to take advantage of improving valuations.
'Information-technology spending is picking up, and as revenue is beginning to come in, sellers are viewing now as a good time to prepare their companies to either get a partner that gives them strength or exit the business altogether,'' Chaturvedi said.
Market-research companies such as Stamford, Conn.-based Gartner Inc., Cambridge, Mass.-based Forrester Research Inc. and Framingham, Mass.-based IDC estimate tech spending will increase between 6 percent and 9 percent in 2005.
Consider one of the acquisition targets, Dearborn-based Superior Consultant Holdings Corp.
Superior, which expected revenue to be about $108 million in 2004 and was profitable for the first time since 1999, announced on Dec. 20 it would be acquired by Affiliated Computer Services for $106 million. Richard Helppie, founder and CEO of Superior, said the acquisition made sense because Superior will gain strength by being part of the larger ACS.
'This will give us more and larger opportunities,'' Helppie said. 'And they're opportunities that we might not get if we weren't part of a Fortune 500 company.''
Superior will become part of ACS Healthcare Solutions. Helppie will serve as managing director of ACS Healthcare Solutions.
Sellers aren't the only ones taking advantage of the situation, Chaturvedi said.
'Buyers are able to take advantage of lower valuations,'' she said.
David Morgan, CFO of Southfield-based TechTeam Global Inc., said acquisitions are a significant part of TechTeam's growth strategy.
On Dec. 31, 2003, for example, the company said it had acquired Chantilly, Va.-based Digital Support Corp. for $6.3 million. TechTeam bought Brussels, Belgium-based Advanced Network Engineering last May for about $1.1 million.
TechTeam bought Bethesda, Md.-based Sytel Inc. for $18.5 million Jan. 3.
'This isn't the heyday of the tech boom where companies are being sold for incredible multiples of their actual value,'' Morgan said.
Valuation has evolved since the tech boom of the late '90s, Chaturvedi said.
Whereas valuation used to be based on multiples of revenue, she said, earnings now play a bigger role.
A company that may have been valued at six times to seven times revenue during the 1999 tech frenzy is more likely to be valued at three times to five times earnings today, Chaturvedi said.
That bodes well for companies with cash on hand, such as TechTeam, which had $40 million at the end of last year.
With its purchase of Sytel, for example, TechTeam not only gets a company that had revenue of $21.1 million through the first nine months of 2004, but one that generates nearly all of its business from the federal government.
Detroit-based Huron Capital Partners L.L.C. also plans to make some tech-related acquisitions, said Mike Beauregard, partner at Huron Capital Partners.
Huron announced Dec. 7 that it wants to acquire a company or companies that provide medical devices to the health care industry.
'Many corporations are spinning off their noncore divisions, making them a strong play,'' Beauregard said.
For example, Saline-based Latitude Consulting Group Inc. acquired Novations Learning Technologies from parent Boston-based Novations Group Inc. on Jan. 18. Terms weren't disclosed.
Kurt Crisman, marketing manager at Latitude, said Novations Group wanted to divest Novations Learning Technologies.
'We had worked with them in the past and knew they had some top-notch customers, so it was an opportunity we simply couldn't pass up,'' Crisman said.
Andrew Dietderich: (313) 446-0315, adietderich@crain.com
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M&A mania
Tech-related mergers and acquisitions have been heating up since October. Here are 12 local deals:
* Statprobe Inc., Ann Arbor, acquired by Basking Ridge, N.J.-based i3 Research. Terms undisclosed. Oct. 4.
* Compuware Corp., Detroit, acquired the technology assets of software company DevStream Corp., Colorado Springs, Colo. Terms undisclosed. Oct. 12.
* Arbortext Inc., Ann Arbor, acquired Advent Publishing Systems Ltd., London. Terms undisclosed. Oct. 13.
* NuSoft Solutions Inc., Bloomfield Hills, acquired Sagestone Consulting, Grand Rapids, for $4 million. Nov. 14.
* SunTel Services, Rochester Hills, acquired TES Networks, Grand Blanc. Terms undisclosed. Nov. 15.
* Iserv Technology Group, Grand Rapids, acquired the customers of HTDConnect from Online Technologies Corp., Ann Arbor. Terms undisclosed. Dec. 1.
* Jackson Staffing, Detroit, acquired InfoServices Inc., Madison Heights. Terms undisclosed. Dec. 2.
* Delphi Medical Systems, Troy, subsidiary of Delphi Corp., acquired Peak Industries Inc., Longmont, Colo., for $44 million. Dec. 8.
* Optasite Inc., Worcester, Mass., acquired 49 cell towers in Michigan owned by Communications Capital Tower Holdings L.L.C. Terms undisclosed. Dec. 16.
* Superior Consultant Holdings Corp., Dearborn, was acquired by Affiliated Computer Services, Dallas, for $106 million cash. Dec. 20.
* TechTeam Global Inc., Southfield, acquired Sytel Inc., Bethesda, Md., for $18.5 million. Jan. 3.
* Latitude Consulting Group Inc., Saline, acquired Novations Learning Technologies, Boston. Terms undisclosed. Jan. 18.
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Chaturvedi
