Equity firm buys ERP vendor Deltek for $1.1B

Purchase by private equity firm Thoma Bravo gives breathing room to struggling Deltek, analyst says

ERP software vendor Deltek is being purchased by private equity firm Thoma Bravo in a $1.1 billion deal, the companies announced Monday. The acquisition is expected to close in the fourth quarter.

Deltek's enterprise resource planning software is aimed at project management, professional services and government contracting firms. The company had roughly $340 million in revenue during its fiscal 2011, making it one of the larger remaining independent ERP vendors after Oracle, SAP and Infor. Deltek had a $3.4 million loss in 2011, but profits began to pick up in this fiscal year.

The vendor's decision to go private follows a similar move made last year by Epicor, which was purchased by private equity firm Apax Partners along with another ERP vendor, Activant.

Deltek's senior management team will remain in place after the acquisition's close, according to a statement.

Overall, Deltek customers should have little to worry about and perhaps even reason to be upbeat, said analyst Ray Wang, CEO of Constellation Research.

"It's a good thing for Deltek to exit," Wang said. That's because public-sector agencies around the world, especially the defense departments where Deltek's software is widely used, are facing substantial cuts, he added. "Things are going to get tougher."

By going private, Deltek is relieved of some of the pressure public companies face to show constant growth and returns for shareholders, according to Wang.

"It gives them some breathing room," he said. If I was a Deltek customer, I'd be excited."

In addition, Deltek has been "significantly under-investing" in its product lines, many of which were acquired, Wang said. As a private company, Deltek can focus on restructuring its portfolio, as well as making the software ready for cloud-based deployments and figuring out how to shift to a subscription revenue model, according to Wang.

Assuming it makes the right strategic moves after the acquisition, Deltek could be well-poised as the economy rebounds, Wang added. "They own this vertical more than anybody else."

ERP vendors in general are "going gung-ho" for the professional services market, said Forrester Research analyst China Martens. "With a company like Deltek that sees [project management] as its bread and butter, it serves them well to have this financial backing."

Deltek's various product lines are well-defined, and therefore it's not likely any will be shed, according to Martens. "What would be interesting is if they could get deeper into these industries by buying up smaller rivals," she added.

The vendor's Kona social project management and collaboration tool, which is also being aimed at consumers, could be another reason Deltek sought investment from Thoma Bravo, Martens said. "They're thinking that it's going to be very big for them."

Chris Kanaracus covers enterprise software and general technology breaking news for The IDG News Service. Chris' email address is Chris_Kanaracus@idg.com

Copyright © 2012 IDG Communications, Inc.

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