CTSpace sold for just £6.5m

Further to Tuesday’s post about the former BuildOnline construction collaboration technology business, I have been piecing together more of the corporate changes leading up to Sword Group‘s acquisition of CTSpace. In the process, I have found a reference to the amount paid by Sword to acquire CTSpace in December 2007 – which, in view of the investments burned to keep its predecessors afloat, make it seem a bargain for a Software-as-a-Service (SaaS) business.

The Sword transaction

It’s been a pretty simple investigation. According to the latest information held at Companies House, an annual return for the period ending 8 July 2007, received for filing at Companies House on 30 October 2007, all shares in BuildOnline Global Ltd were held by Collaboration Technology Inc – a company I learned was incorporated on 15 December 2006 in Delaware – registered at CTSpace’s head office address in Stevenson Street, San Francisco, California.

I did a quick search on the company name, and discovered that Sword Soft Ltd, a UK subsidiary – formed in March 2007 – of the Sword Group, paid US$13 million [ie: approx. £6.5m] for the acquisition by way of merger of Collaboration Technology Inc, a deal finalised on 21 December 2007 (Sword Soft was represented by Raphael S. Grunfeld, a partner in New York law firm Carter Ledyard & Milburn LLP).

When asked to confirm this figure, a CTSpace spokesman told me “no comment”. He said that “CTSpace is 100% owned by the Sword Group which has two divisions – Sword Soft and Sword Solutions. The former focused on software products and the latter on services. CTSpace is a part of Sword Soft.”

Assuming this figure is accurate, it is tiny compared to the mind-boggling sums invested in and eaten up by the various companies that, through numerous mergers and acquisitions, have been absorbed into the business since the late 1990s, much of it in the dot.com boom years around the turn of the century. Investors included some well known institutions and construction businesses (I will be blogging about this soon).

The price of a distressed business not a SaaS business

In the meantime, the value suggests that Sword has acquired a SaaS business at a good price. I discussed valuations of SaaS businesses after the private equity-backed management buy-out of 4Projects in July 2007, and suggested – based on 7x multipliers applied to other SaaS businesses – that a figure around £20m would be a distinct possibility for a business turning over around £3.2m. It would seem that the figure paid for CTSpace was much more in line with the 1.5x to 2x multipliers paid for conventional software companies – perhaps reflecting the distressed nature of the business (and maybe some investors’ wishes to get at least something, however small, from their investments and to finally draw a line under the whole saga).