Admiration, apprehension, concern, excitement – SaaS construction collaboration vendors react to Oracle’s pitch to buy Aconex.
Market reaction to Oracle’s Aconex acquisition announcement yesterday saw a predictable leap in Aconex’s share price on the Australian Securities Exchange. From Friday’s close of A$5.29, Aconex shares rocketed 44% to close at A$7.63 (just below Oracle’s offer price), with over 27 million shares traded (but still below Aconex’s historical high of over A$8 in July 2016).
In Australia, Atlassian founder Mike Cannon-Brookes warned Australian fund managers to ignore Aussie tech firms at their peril, calling the deal a big win for Aussie tech. While some analysts and investors believe there is some scope for a second offer from another major tech company, RBC Capital Markets equity research vice-president Paul Mason said “it’s difficult to see another player that could compete with Oracle to acquire it.” (read AFR article).
The UK’s Financial Times pointed out Aconex has lost money in four of the past six years, and highlighted investor scepticism about Oracle’s cloud services plans (not helped by Oracle’s latest quarterly results showing a disappointing cloud performance), adding “Oracle shareholders must hope that, ultimately, builders, not M&A bankers, will help put the company’s cloud growth on a steady footing.”
I talked to staff from several rival vendors about the deal. There was admiration for what Aconex and its founders Leigh Jasper and Rob Phillpot had achieved, with one source saying the valuation was “almost unbelievable” (nearly ten times the company’s revenues to 30 June 2017 reported in August) given that Aconex declared a statutory loss last time around.
With Oracle the first major B2B software giant to make a concerted play in the construction vertical market, another source said this has to be a good thing for the industry’s digital transformation (“they know data, they know SaaS”). Other industry sources wondered if Oracle might be seen as too big – or “even too American” – for some customers to work with, though one said the deal might also help build Aconex adoption in the US, with Oracle offering one-stop PaaS (platform as a service, ie: hardware and infrastructure) and SaaS.
There was concern about what the acquisition might mean for some Aconex staff. Oracle was described as “an acquisition machine” likely to rapidly spit out personnel who were surplus to requirements in Oracle’s construction and engineering global business unit (each Oracle GBU has its own general manager, development, sales, marketing, consulting and M&A strategy). There is already some potential overlap between toolsets – Aconex was looking to expand into construction payment management, for example (the focus of Oracle Textura). However, the concern was tempered by excitement about potentially recruiting ex-Aconex staff with detailed knowledge of the construction collaboration technology sector.
Sanjeev Shah (CEO of UK SaaS vendor GroupBC) talked about the deal in the context of ‘common data environments’ (CDEs):
“We’ve always thought it highly likely that a major vendor with a significant bias towards financials/ERP would be interested in acquiring one of the mainstream CDE providers. I believe it’s good for the industry to understand the significance and importance that CDEs have to play in the world of digital construction now and in the future and I believe the acquisition by Oracle is a strong endorsement of this.”
“Looking at the numbers, it’s an excellent deal for Aconex shareholders, so congratulations to Leigh and Rob for delivering such a great result. That said, this (coupled with their acquisition of Textura) is an inspired deal for Oracle and clearly signals their serious intent regarding construction – which is a good thing for the industry. Existing software suppliers must take note and up their game accordingly – it’s going to be a case of have lunch or be lunch!“
Thomas Bachmaier, CEO of Germany’s think project!, says:
“Oracle’s acquisition of Aconex in our view highlights the great potential of the engineering and construction market as well as the strategic importance of online project collaboration for the industry. It’s a very positive signal for us as the leading and now largest pure-play provider in Europe.”
Tony Ryan, CEO of London-based Asite, said:
“I think this is amazing for the industry that a business like this can be valued appropriately. I guess we are the last man standing from the original crowd that began this journey. Hats off to Rob and Leigh, but there is now so much more to do….”