Auckland-based software company Agility CIS has bought US-based rival Znalytics, in a deal pegged at "tens of millions" - with some unique negotiating quirks due to the coronavirus outbreak.
The 22-year-old Agility CIS makes billing software for utilities, and was born out of power company deregulation in New Zealand and Australia in the late 1990s and early 2000s.
One insider compares it to NZX-listed Gentrack, without the exposure to the airport market. However badly they're hit by Covid-19, households aren't going to stop using electricity or drinking water - and being billed by their utility for it.
Most of Agility's customers are in Australia and New Zealand, including Nova and Energy Club on this side of the ditch, but it also has Houston-based Gexa Energy and Middle Eastern player Tabreed on its books, among other international clients.
Agility CIS's four founders sold out to private equity in November last year for an undisclosed sum, with NZ's Pioneer Capital taking a 35 per cent stake and London-based SilverTree Equity the balance.
At the same time, Simon Moutter came on board as a director and "operating partner" - his first major gig since leaving Spark in June.
"As operating partner, I work with chief executive David Forsyth and his team to professionalise the business and ensure it has a clear customer focus, sound strategy for growth and the necessary operational processes and capability to execute," Moutter told the Herald.
Forsyth, in turn, said Moutter had helped Agility CIS transition form a "founder-led" company to a "private equity-led" one.
What attracted Moutter to the company?
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"Agility CIS is a great NZ software company that most people have never heard of," he says.
"It flies under the radar and does a brilliant job producing really slick software that energy and water utilities use for billing and customer experience management."
Agility CIS (the initials stand for Customer Information Systems) has 175 staff. The Znalytics deal will boost that to around 250.
What's behind the purchase?
Agility CIS currently has footholds in the US and Middle East, but most of its business in Australia and NZ.
Buying Znalytics will allow it to expand faster in North America, and enter the Japanese market, where its new acquisition has customers. Agility CIS also had an eye on Znalytics cloud smarts, which will help with an ongoing transition to SaaS (software-as-a-service), Forsyth says.
Moutter adds, "From my perspective, the acquisition is an outstanding example of how a bolt-on acquisition can facilitate a step-change in growth. Agility CIS already earns 90 per cent of its revenue from Australia, the US and Middle East, as these energy markets progressively deregulate and become increasingly competitive. Znalytics materially boosts AgilityCIS's capacity to grow more quickly in the US and provides an entry to the Japan market, which is in the early stages of deregulation."
The privately-held company does not reveal detailed financials, but Forsyth says revenue is in the tens of millions and that Agility CIS is "very profitable."
The new private equity owners want faster growth, both organically and through acquisitions, he says.
That suits Moutter.
"It's fantastic to be working with a New Zealand business that wants to be bold and put more capital to work in this post-Covid-19 era, when most companies have closed their wallets," he says.
"This is the first bold move we've made and it certainly won't be the last."
Other deals may or may not have the same coronavirus quirks.
Forsyth and his team ended up meeting face-to-face only once with Znalytics Atlanta-based founders Mari Reddy and president Subash Sama (who will stay on).
That was in February. "We almost got stuck in the US," says Forsyth.
Video chat and digital data room software was used to wrap up the rest of the deal amid lockdowns in the US and NZ.
Forsyth says in the end, it all went smoothly.
The Agility CIS-Znalytics deal is the second recent example of a Kiwi software company buying a US competitor following Wellington-based medtech company Volpara's $22m purchase of Seattle-based MRS Systems.
Forsyth said Agility CIS's new private-equity backers have ambitious growth plans, so expected more M&A ahead.