Private equity firm Francisco Partners agreed today to purchase all the outstanding shares of FrontRange Solutions for $200 million. The transaction is expected to close in approximately 90 days, subject to approval by FrontRange shareholders. FrontRange's board has endorsed the offer, and will use the cash to pay shareholders about $0.93 per share in a dividend payout and return of capital.
"By bringing it private, we get access to more capital," says CEO Michael McCloskey. The move allows the company to be more aggressive in terms of future market opportunities to expand the company's product offerings, according to McCloskey.
FrontRange products currently include GoldMine CRM line (with more than 2 million users) and Heat, the company's service management product line. The acquisition brings more than 140,000 FrontRange client companies to the technology-focused private equity firm, which has $2.5 billion of committed capital. Already, the equity firm has invested in more than 50 companies, with transaction values ranging from $30 million to $2 billion.
The purchase enables FrontRange to take itself out of the limelight and focus on meeting long-term goals instead of quarterly earnings, according to Sheryl Kingstone, program manager and industry analyst with The Yankee Group. "FrontRange has performed well in the last two years and in conjunction with Francisco Partners we would expect them to pursue an aggressive growth strategy," she said in a statement. "Customers and prospects should expect market expansion, innovation, and potential acquisitions."
Rivals like Siebel Systems and BMC Software have struggled with older technology, while FrontRange has increased market share and become increasingly relevant to enterprise IT buyers, according to the company. The investment comes following a new release of FrontRange software earlier this week, IT Service Management 5.0.4, which adds new inventory management and knowledge management modules.
"FrontRange Solutions has out-performed the industry for the last two years, growing at a rate that far exceeds our competition," McCloskey said in a statement. "During this period, we have invested heavily in both R&D and sales expansion, while continuing to increase our profitability. With several new products coming to market, we are well-positioned for continued growth, and plan to increase our market share."
Kingstone maintains that the move does not change the competitive landscape just yet, however. "It's not a wonderful market for CRM right now, and Microsoft's release of 3.0 turns the pressure up for FrontRange. By not having to perform for shareholders, and being able to keep projects quiet, FrontRange can play poker better."
Additional reporting by Marshall Lager