In a cash-only deal announced today, Hansen Technologies, based in Australia, is to acquire Canada’s Sigma Systems for CAN$157 million. The deal took market watchers by surprise and in an exclusive interview with IoT Now, Tim Spencer, CEO of Sigma describes what led to the deal.
Why, for example, did Hansen choose to buy Sigma Systems now, and what does it plan to do with the Toronto-based digital transformation software business? Here, IoT Now’s editorial director, Jeremy Cowan, talks to Sigma Systems’ CEO, Tim Spencer about the deal, the background, and where the expanded business is heading next.
IoT Now: I know you haven’t mentioned the price but Hansen is publicly traded, so can you tell us now how much Sigma is being bought for?
Tim Spencer: Sigma is being acquired for CAN$157 million (UK£89.43 million). The acquisition is set to close on May 31st, 2019.
IoT Now: Is this a cash deal or are shares being traded. If so, how?
Spencer: This is a full cash deal, with a 100% purchase of current equity owners including Birch Hill Equity Partners and all other equity owners in the company.
IoT Now: Sigma has been profitable and has been exploring its expansion options. So, why did Sigma’s owners decide to sell now?
Spencer: Sigma is a strong and attractive business and, over time, has been approached by various companies interested in acquiring or merging with Sigma. Andrew Hansen and I first met over a year ago, and through a series of progressive conversations we both felt there was a good fit between the companies and we were well aligned on how to deliver to the market a compelling value proposition. Most predominantly this was seen as a powerful accelerator of business growth support by 4 key factors:
First was combined market strength. This acquisition represents two strong and profitable organisations coming together. The combined entity will now serve in excess of 600 customers with 1,600 employees. The acquisition has been pursued as a growth-driven value strategy that expands our addressable market, creates new opportunities outside of the telco space into energy and utilities, and creates broader diversification across industry verticals.
The next factor is complementary products and services. The acquisition will result in a largely complementary product portfolio. In fact, there is no significant overlap in our portfolios. The combination of our two portfolios creates greater breadth in our value proposition that now spans ‘create, sell, deliver, bill, and support’ … from product innovation to revenue realisation.
Then there is talent and expertise. The acquisition will build an even stronger organisation with increased financial scale, expanded expertise and a deeper bench of talented delivery specialists. Additionally, it will afford Sigma expanded R&D (research & development) scale to accelerate our product development and the resulting value we provide our customers.
Finally, there will be Cross-Sell Opportunities. Hansen currently derives approximately 60% of its revenue from the energy sector. With this substantial footprint there is strong potential to cross-sell Sigma’s core portfolio into the energy market, leveraging Hansen’s experience and expertise within this vertical. There is also strong opportunity to cross-sell our core capabilities into the Hansen Telco and Pay-TV customer base.
IoT Now: What particularly attracted Hansen Technologies to Sigma Systems?
Spencer: Hansen Technologies has pursued a very active acquisition strategy with a strong track record over the last 10 years of making strategic and value-accretive acquisitions. During this period, nine additions have been made to the group. The company has achieved a 28% CAGR (compound annual growth rate) over the last four years, with a significant component of this growth being fuelled through acquisitions.
Hansen’s acquisition strategy has been to extend the company’s footprint into new market segments, geographies or industry verticals, by acquiring companies that have “fit-for-market” products and a strong installed customer base. Acquired companies are within or adjacent to Hansen’s core competencies with strong recurring revenues.
Given these criteria, Sigma was acquired due to its complementary software IP portfolio, strong business model, alignment to Hansen’s core competencies and markets served, and for its potential to drive new revenue by cross-selling into Hansen’s existing multi-vertical customer base. Additionally, Sigma’s skill set, subject matter expertise and highly aligned culture were key ingredients to the strategy and a necessary requirement for any acquisition that Hansen pursues.
IoT Now: Will Sigma trade under the Hansen brand in future, or as a standalone business unit?
Spencer: On closing, Sigma Systems will operate as ‘Sigma Systems – A Hansen Technologies Company’. After closing, the new organisation will have a three-phase integration plan where a joint integration team will be assembled to identify key areas of integration to successfully support the company’s growth strategy.
There will be no change to the Sigma brand. Sigma will be referred to as Sigma, a Hansen Technologies company.
I will continue to operate as CEO of Sigma, reporting to a newly-formed board of Sigma Systems. The executive leadership team will also continue to report to me and will operate in the same manner as prior to the acquisition. Hansen’s main focus is to ensure Sigma continues to execute as planned, with minimal disruption to the core business.
Tim Spencer, CEO of Sigma Systems was talking exclusively to Jeremy Cowan, editorial director of IoT Now.
Also see: Hansen Technologies acquires Enoro