Last week, Corcentric, Inc, the New Jersey-based provider of financial process automation and procure-to-pay (P2P) solutions, announced that it has signed a definitive agreement to purchase Determine, Inc. (NASDAQ: DTRM), the Indiana-based provider of contract management and source-to-settle solutions for the cloud. The deal is worth roughly $32 million and is expected to close within the second quarter of calendar year 2019. The Boards of Directors at both companies have approved of the pending sale, but Determine shareholders must also approve of the deal, and the company must clear other local requirements in order for it to close.
To discuss the deal in greater detail, Ardent Partners’ analyst team received a briefing from members of Corcentric’s executive team, including President and Chief Operating Officer, Matt Clark, Senior Vice President of Marketing, Kate Freer, and Marketing Manager, Michael Ruhl.
About the Deal
Matt Clark led most of the discussion for Corcentric, and described his company’s acquisition of Determine as synergistic in nature given that Corcentric has been trying to build out its suite of product offerings over the past few years — both organically and via acquisition — to address how businesses source, purchase, pay, AND get paid. The acquisition of Determine will help Corcentric fill out its puzzle with a big block of sourcing and procurement solutions, including spend analysis, sourcing, contracts, supply management, and eProcurement. Determine’s solutions fit nicely with its Group Purchasing Organization (GPO) expertise, and suite of solutions covering accounts payable (AP), finance, and supply chain finance. This deal is also very well aligned with their acquisition last year of Source One Management Services, a strategic sourcing and procurement services firm.
According to Matt, the Corcentric team has been focused on developing a comprehensive suite of source-to-settle solutions and, with a large line of credit ($200 million) established last year, began to examine the market for potential acquisition opportunities that could help them achieve their goals. They rightly identified Determine, which, like Corcentric, has built out its product offerings over time on its platform — through acquisition and organic growth.
Determine has a strong suite of “upstream” product offerings, providing users with automated spend analysis, eSourcing, contract lifecycle management, and supplier management capabilities and matches them with a competitive P2P solution, that does include eInvoicing. Determine has a global customer base, with a particular strength in Europe, an area where Corcentric plans to expand. At the time of print, Determine has more than 240 customers worldwide, while Corcentric has more than 6,000 customers.
Matt said that while there are some common customers that use solutions from both companies, there is not much overlap. As a result, the Corcentric will benefit from new revenue opportunities and the opportunity to up-sell and cross-sell an expanded customer base with additional features and applications. In particular, Corcentric will benefit from the innovative feature functionality of and growth potential on the Determine Cloud Platform, while Determine will have access to a massive pool of potential customers exploring digital transformation within their source-to-settle value chains. Ultimately, the two companies intend to combine their product offerings and create a “one-stop shop” for their current customers and future prospects that are looking to transform their sourcing, procurement, contracting, AP, and accounts receivable organizations and operations.
Matt stated that Corcentric will blend Determine’s infrastructure and product offerings to create a “newly-combined company” that aligns their capabilities “into a single organizational structure.” While there is “some overlap in AP capabilities,” Matt said that Corcentric will integrate most solutions onto one platform as a “one-stop-shop” for source-to-settle, and make them available to customers depending on their specific needs. They plan to keep open both the Carmel, Indiana and Paris, France locations; and as Matt said, Determine’s distributed corporate offices fit well with Corcentric, which has offices in McLean, Virginia, Cherry Hill, New Jersey, and Chicago, Illinois.
Ardent’s Analysis
Since rebranding itself in October of 2015, Determine (formerly known as Selectica) had been making good strides forward to unify its disparate solutions onto a single platform. This was on the heels of several smart and opportunistic acquisitions of small, but highly competitive providers (Iasta & b-pack). Unfortunately the company has not been able to execute on its strategy as quickly is it needed to as it lacked the necessary resources to scale its plan aggressively. Another challenge the company has faced is the one that all smaller, publicly-traded firms face when they hit difficult financial times. As recent financial reporting has shown, Determine has struggled to drive customer, sales, and revenue growth, and its competitors can use this against them in competitive sales cycles. Firms in Determine’s situation are invariably better served by being private.
Determine’s sale to Corcentric should enable the new company to accelerate its product transformation, make greater investments in building out the Determine Cloud Platform, and ultimately bring a source-to-settle suite to market. If done well, there are some fairly sizable opportunities to cross-sell an expanded set of product offerings to its large, aggregate customer base.
Ardent Partners ranks Corcentric as a leader in the ePayables marketplace. With its acquisition of Source One and Determine (a reasonable assumption), the company has the potential to be a rising star in the source-to-settle solution arena.
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