Quick Take on the Dassault Systèmes Acquisition of Exalead

Today, in what I consider a surprising move, French PLM and CAD vendor Dassault Systèmes announced the acquisition of French enterprise search vendor Exalead for €135M or, according to my calculator, $161M.  Here is my quick take on the deal:

  • While I don’t have precise revenue figures, my guess is that Exalead was aiming at around $25M in 2010 revenues, putting the price/sales multiple at 6.4x current-year sales, which strikes me as pretty good given what I’m guessing is around a 25% growth rate.  (This source says $21M in software revenue, though the year is unclear and it’s not clear if software means software-license or software-related.  This source, which I view as quite reliable, says $22.7M in total revenue in 2009 and implies around 25% growth.  Wikipedia says €15.5M in 2008 revenues, which equals exactly $22.7M at the average exchange rate.  This French site says €12.5M in 2008 revenues.  The Qualis press release — presumably an excellent source — says €14M ($19.5M) in 2009 revenues.  Such is the nature of detective work.)
  • I am surprised that Dassault would be interested in search-based applications, Exalead’s latest focus.  While PLM vendors have always had an interest in content delivery and life-cycle documentation (e.g., a repair person entering feedback on documentation that directly feeds into future product requirements) , I’d think they want to buy a more enterprise techpubs / DITA vendor than a search vendor to do so as in the PTC / Arbortext deal of 2005.  Nevertheless, Dassault President and CEO Bernard Charlès said that with Exalead they could build “a new class of search-based applications for collaborative communities.”  There is more information, including a fairly cryptic video which purports to explain the deal, on a Dassault micro-site devoted to the Exalead acquisition, which ends with the phrase:  search-based applications for lifelike experience.  Your guess as to what that means is as good as mine.
  • A French investment firm called SCA Qualis owned 83% of Exalead steadily building up its position from 51% in 2005 to 83% in 2008, through successive rounds of €5M, €12M and €5M in 2005, 2006, and 2008 respectively.  This causes me to question the CrunchBase’s profile that Exalead had raised a total of $15.6M.  (You can see €22M since 2005 and the company was founded in 2000.  I’m guessing there was $40M to $50M invested in total, though some reports are making me think it’s twice that.)
  • The prior bullet suggests that Qualis took $133M of the sale price and everybody else split $27M, assuming there were no active liquidation preferences on the Qualis money.
  • Given the European-focus, the search-focus, and the best-and-brightest angle (Exalead had more than its share of impressive grandes écoles graduates), one wonders why Autonomy didn’t end up owning Exalead, as opposed to a PLM/CAD company.  My guess is Autonomy took a look, but the deal got too pricey for them because they are less interested in paying up for great technology and more interested in buying much larger revenue streams at much lower multiples.  In some sense, Autonomy’s presumed “pass” on this deal is more proof that they are no longer a technology company and instead a CA-like, Oracle-like financial consolidation play.  (By the way, there’s nothing wrong with being a financial play in my view; I just dislike pretending to be one thing when you’re actually another.)
  • One wonders what role, if any, the other French enterprise search vendor, Sinequa, played in this deal.  They, too, have some great talent from France’s famed Ecole Polytechnique, and presumably some nice technology to go along with it.

Here are some links to other coverage of the deal

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9 responses to “Quick Take on the Dassault Systèmes Acquisition of Exalead

  1. Hi Dave,
    As you kindly mentioned Sinequa, here are my thoughts on this deal. Includes a few additional figures.

    http://jean-ferre-blog.blogspot.com/

    kind regards,
    Jean

  2. Thanks Jean — if your profitable figures are correct, then I think I’m way under-estimating the total invested capital. Might be over $100M if they can afford to lose 15M euros on 14M in revenue for multiple years.

  3. Substitute “profitability” for “profitable” in prior comment.

  4. Jean,

    I added your post to the resources list above. Thanks again for sharing.

  5. Pingback: Exalead Acquired by Dassault : Beyond Search

  6. Hi Dave,

    You’re right to say Exalead wasn’t France’s Google — probably closer to France’s Convera. (Though Convera switched focus from one “big plan” to the next, while Exalead has been doing it all at once.)

    As for why Dassault would be interested in Exalead, I think it’s mostly a cultural fit, and a combined view of “core business, loosely related innovations derived from that, and c2b.” That’s why I focussed on that, rather than financials — you can read my take on it here: http://www.eiwatch.com/Blog/1920-Exalead-acquired-by-Dassault-Systemes

  7. Adriaan,

    Thanks for your comments and I enjoy the softer side of the analysis as well.

  8. About surprising purchases.
    PriceMinister just been bought by a Japanese company for 200 millions euros.
    PriceMinister is a French commerce site that has never made a significant margin.
    Go figure out why?

    http://hightech.challenges.fr/actualites/20100618.CHA5175/priceminister__lexcellent_deal_de_kosciuskomorizet.html

  9. Pingback: Exalead Two Years after the Sale : Beyond Search

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