In what Supply Chain Matters would context as a sudden and stunning announcement, E2open Inc. announced late last night that it has acquired supply chain planning, collaboration and response management software provider icon-scm in a transaction valued at approximately $34 million in total consideration. (Disclosure: E2open is one of other named sponsors of this blog)
According to this morning’s briefing call with analysts, the transaction itself involves $18 million in cash, $9 million in stock and the assumption of $7 million in existing debt. The transaction is expected to close over the next 90 days. It was disclosed that icon’s calendar 2012 revenue run rate was $10 million in revenues, thus E2Open has apparently secured the company for 3 times earnings, a rather attractive sum by today’s standards. However, the $10 million revenue run rate contrasted with $7 million outstanding debt points to other problems that forced icon to act.
Founded in 1992, icon-scm was a privately held company and is current headquartered in Karlsruhe Germany. Our SAP readers should be familiar with icon-scm because back in 2010-2011, SAP had elevated the icon capabilities into the preferred partner status and announced its intention to incorporate the company’s response management capabilities into its supply chain management support capabilities. Subsequently, SAP announced the product, SAP Supply Chain Response Management by ICON-SCM with a listing on the SAP price list for the sales team to sell. SAP offered the capability as an augmentation for SAP supply chain management customers, especially those residing in high technology, consumer electronics industries. Among current icon-scm customers are Avnet, Foxconn, Hewlett Packard, Pratt & Whitney, Western Digital among others.
This morning’s briefing from E2open disclosed that the initial conversations began in March and accelerated to last night’s announcement. E2open managed to have icon-scm sign a no-shop agreement during these discussions. There was also a revelation in the analyst Q&A that SAP may have had intent to acquire but became distracted by other events occurring. For icon-scm, turning over the entire sales process to SAP may not have helped generate desired sales growth.
Supply Chain Matters has reached out to SAP to secure a comment regarding how this announcement will affect previous announced icon-scm capabilities for SAP customers.
E2open CEO Mark Woodward indicated his belief in this morning’s briefing that SAP will henceforth discontinue its partnership with icon-scm but will continue to support any existing customers. Woodward further indicated that all current employees and offices of icon-scm would be retained by E2open.
The announcement itself vastly accelerates the product roadmap timetable for E2open, with an indication of as much as 24 months. The roadmap calls for the first phase of data integration to occur in the first 6 months with plans to integrate icon-scm capabilities into the E2open network in 2014. The balance of icon-scm capabilities will be provided as subsequent versions of Rapid Deployment applications in a timetable that extends across 2014-2015. It is E2open’s desire to convert all existing on-premise customer agreements to a hosted, subscription based model, which will be the model of engagement going forward.
Obviously this announcement has significant impact to the existing supply chain planning, collaboration, response management and B2B network vendor base. It is another endorsement of the need for integrating supply chain planning with real-time execution in order to make more timely supply chain end-to-end resource decisions. For manufacturers and retailers contemplating the need to deploy such capabilities, the announcement provides further evidence that the vendor community is hearing your desire to offer such capabilities in a single vendor capability.
Supply Chain Matters will provide additional insights related to this announcement in subsequent commentary when further information comes forth. In the meantime, we believe this is a positive development for the market.
Disclosure: E2open is one of other sponsors of the Supply Chain Matters blog.