Another company bit the dust today as Pitney Bowes announced it was buying up the rest (90%) of Firstlogic in a deal valued at $50.3 million. One can't help but wonder why Firstlogic would agree to this...
First Pitney Bowes bought Group 1 -- another data quality vendor -- last year. Why do they need yet another one? Certainly Firstlogic fills in some holes that were missing in the Group 1 offering like data profiling but it seems they could have created that function for a lot less than $50 million.
And speaking of the $50 million, Firstlogic had annual revenues last year of $55 million. It has NO debt. So why such a low ball offer? The purchase price comes up to be a 1.0 multiplier -- that is, Pitney Bowes paid exactly what Firstlogic had as revenues for last year. This is remarkably low for a software company of Firstlogic's caliber. Generally the multiplier is anywhere from 3 to 10. And it is especially surprising since Firstlogic is having a better year this year than last. Sounds to me like there is more to this story than meets the press coverage.
What does this mean for the data quality industry on the whole? It may be very good news for the few remaining independent data quality vendors like DataLever and DataFlux. Competition will surely heat up for these companies. Secondly, to have such a large company (Pitney Bowes is a $50+ billion company) will certainly put a brighter spotlight on the overall data quality industry.
What will happen to Firstlogic remains to be seen. The press releases state that the company will start off as a wholly-owned subsidiary of Pitney Bowes. Whether this will continue into the future remains to be seen. My bet is that it will be subsumed completely by Pitney Bowes and the company as such will disappear.
I wish my friends at Firstlogic all the best in what must be an uncertain time for them.
Yours in BI Success,
Posted September 1, 2005 1:50 PM
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