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WatersTechnology: Confluence to Seek Acquisitions Following Majority Investment

STA

Mark Dowd

Mark Dowd

Data management software vendor Confluence is seeking to ramp up its acquisition strategy following a majority investment by TA Associates, a global-growth private equity firm.

“TA has expressed an interest in seeing us more aggressively overlay an acquisition strategy on top of our already pretty aggressive organic growth strategy,” says Mark Evans, chairman, CEO and president of Pittsburgh, PA-based Confluence.

Neither party would disclose the financial terms of the transaction, but the organizations have been on each other’s radar since 2006, when Confluence took an investment from Polaris Partners, says Evans, adding that they were also in talks with TA back then, but Confluence’s mission “just didn’t quite align with their strategic vision at the time.”

He says they maintained a good relationship, so when Confluence began “looking for a new partner to support us through our next phase of growth,” TA “pretty quickly got to the front of the pack. It only took about 12 years of investing time and relationship to get there, though.”

“We missed it the first time in 2006 and we didn’t want to miss it this time,” says Jonathan Meeks, a managing director at TA Associates, who will join the Confluence board of directors.

Evans says he does not anticipate any major shift in strategy or personnel at Confluence, with the exception of the renewed focus on acquisition. In 2013, the company acquired Vietnamese data and reporting solutions provider DataAgent, and the following year Confluence bought Ofival, a Belgium-based data solutions provider, two acquisitions that Evans says “worked out very well for us.” He says it dialed back the inorganic growth for a few years, and adds that although TA is steering the company back toward acquisitions, “that’s not really changing anything about where we think we’re going. That’s just saying, are there ways we can get there a little quicker or partnering with people who are best of breed as well.”

Specifically, Evans says Confluence is drawn toward acquisitions that bring in intellectual property.

“Writing software is something a lot of people can do, but writing software that has imbued in it the expertise that’s required to get the numbers right and really be able to rely on them is hard, and that’s something we really pay a lot of attention to,” he says. “One of the things that TA gets is they appreciate the fact that in our industry as a whole, there’s sea change happening right now where the markets are expecting more and more at a rate that is absolutely unsustainable within the existing technology frameworks.”

Meeks says TA likes to back a good-sized platform business with a large customer base and an opportunity for point products, but which might be lacking the distribution or client base to gain access, calling it an approach “that’s worked exceptionally well for us.” He believes Confluence is in a great position to make acquisitions, and says he sees potential for a “flow of opportunities” toward the company’s growth.

“I think in the future there may be some things we’re able to acquire inorganically to fill out the platform,” he says. “We just think it’s a great business and are excited for them to be heads down for the next five years solving industry problems.”

Meeks says the asset management industry’s back offices are “far overdue” for an overhaul and anticipates a shift from monthly to daily reporting, via electronic and web-based methods that integrate performance and tax analytics with investor statements.

“Confluence is uniquely positioned to help the asset manager community and the administrator community solve this nearer-to-real-time data integration problem,” he says. “We serve eight of the 10 largest global administrators and many of the largest asset managers. These big financial institutions would love to shrink their number of vendors, so we think we’d be a super partner for some of those guys with great technology, but who aren’t as broad as they’d like to be.”

Meeks says discussions with administrators have shown that they are “excited to rely a little less on internal development and move to SaaS [software as a service], move to the cloud, move to more industry-standard solutions like Confluence,” adding that they’re happy to partner with third-party vendors who can handle the demands of very large administrators.

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