Aconex valued between $350m and $410m

News reports from Australia (The Australian, for example) say SaaS construction collaboration software business Aconex will float as a public company on the Australian Securities Exchange in late November (see previous post) with a market capitalisation of between Au$351 million and Au$406.5m (£190m-£220m).

Joint lead managers Macquarie Capital and UBS priced the float at the weekend after analysts estimated the enterprise value at between $350m and $405m (this is towards the lower end of previous speculation). The pricing equates to $2.20 to $2.60 per share.

According to the reports, Aconex launched its roadshow in Sydney today (Monday) for an initial public offering of the business, earmarked for late November, and will raise between $122m and $135m from investors. The investor roadshow will end in Melbourne later this week and then head to New Zealand and Hong Kong.

Australian Financial Review says the size of the IPO raising will be clear once Aconex’s existing shareholders – which include co-founders Leigh Jasper and Rob Phillpot, VC firm Francisco Partners and several smaller investors – nominate how many existing shares they will sell at the float. Francisco Partners, which has a 24% stake, is expected to sell some of its shares.

A bookbuild for the business is slated for 27 October, and the prospectus will be lodged by 28 October.

My view

There is, of course, no precedent for this IPO, as no SaaS construction collaboration technology business has previously floated. We have had a number of mergers and acquisitions over the years, but none valuing a business at anything like the level of Aconex – but then Aconex is, by some distance, the only vendor achieving significant global revenues. In the year to June 2013, total revenues were Au$52.6m, c. £28.4m (see post); recent reports relating to the IPO suggest revenues are now around Au$66.2m (£35.9m), with losses down from Au$8.9m to Au$4.1m, and CEO Leigh Jasper saying the business is on track to move into profitability next financial year.

Talking with various competitors, UK and US-based, there is a view that Aconex invested hard to grow awareness and a strong presence in the US market, but hadn’t reached the penetration needed to do an IPO in the US, hence the Australian flotation. This may reduce pressure on Aconex’s balance sheet – it is six years since the company secured a Au$107.5m (then £48.8m) private equity investment from Franciso Partners. The business’s expansion since then has yielded one small acquisition (Grazer in 2012) and in a market that was also badly hit by the global financial crisis, Aconex has been accumulating losses since 2008 as well as weathering a few boardroom storms.

The Francisco Partners investment then valued Aconex at between Au$215m and Au$300m, then rating Aconex somewhere between five and 7.5 times revenues – not far short of the 7.6 multiple achieved by SaaS web conferencing business WebEx when it was acquired by Cisco Systems in 2007 (see my Valuing a SaaS business post). The 4Projects MBO in 2007 valued that business at around 6.7 times revenues (post). A more recent comparison might be the 2013 IPO of US-based SaaS construction payment management business, Textura (now opening in Europe), whose initial price was about 9.8 times revenues (albeit in a US investment market hungry for SaaS operators with industry-leading products).

Looking at the forecast valuation, therefore, it appears Aconex is valued at between 5.3 and 6.1 times revenues (AFR reported the IPO pricing represented “3.9 times to 4.6 times revenue on an enterprise value to revenue basis”) – on the face of it, slightly below previous deals, but, of course, we are dealing with different companies in different investment markets at different times.

Update (15 October 2014) – Are some Australian market-watchers and fund managers getting slightly twitchy about the Aconex IPO? For example, reporting on the IPO roadshow, Maggie Lu Yueyang writes that:

“Aconex is trying to persuade fund managers that it sees great global market opportunity for construction software, and its offshore expansion post IPO is not risky. …

“It is understood that Aconex sees the low penetration rates for construction collaboration software globally as an opportunity to grow its business after the IPO, estimating the global market to be worth around $5 billion.

The company is aiming to ease fund managers’ concerns around its offshore expansion plan, and will argue that it actually started offshore expansion 10 years ago and has become profitable in certain offshore markets.

The article goes on to mention various large-scale projects Aconex has worked on, including Hong Kong Airport, the Venetian Resorts in Macau, the Marina Bay Sands project in Singapore, the Panama Canal expansion (mentioned in a Conject blog article today) and the New York City Hall project.