Feature
Sitecore just became a billion dollar web content management systems (Web CMS) giant.
A Stockholm, Sweden private equity investor has acquired a majority stake of the Copenhagen Web CMS provider in a transaction that values Sitecore at about $1.14 billion, company officials announced today.
Investor EQT will take the majority stake from Sitecore founders, investor Technology Crossover Ventures and other minority shareholders. Sitecore in the deal rolls over a "significant portion" of its equity and partners with EQT for the "next phase of growth." EQT has raised 18 funds and approximately $33 billion. Sitecore, a private company, generates revenue yearly of about $227 million.
A Sitecore spokesperson did not confirm executive changes when asked this morning by CMSWire.
Hanging With Unicorns
To put this into perspective for the Web CMS industry, Adobe Systems bought web content management provider Day Software in 2010 in a transaction valued at $255 million. The billion-dollar valuation from EQT gives Sitecore the best valuation on the day of a sale for web content management providers like itself, according to Scott Liewehr, president and founder of New York-City based Digital Clarity Group.
"It's an amazing valuation for Sitecore," he told CMSWire. "By far the best in this space."
As a whole, Sitecore's not in the Adobe ballpark quite yet. The San Jose, Calif.-based provider has a market cap listed at $47.5 billion today by Yahoo Finance. Adobe Marketing Cloud alone saw $1.36 billion in revenue for 2015.
Today's news comes less than a year after a bit of doom and gloom for Sitecore. In July, Sitecore announced it was cutting jobs. A company spokesman told CMSWire in July it experienced a “modest workforce reduction." While he did not quantify "modest," multiple sources with knowledge of the cuts told CMSWire the reductions affected between 100 and 150 employees, mostly in Europe.
Sitecore, founded in 2001, now has 800 employees across Europe, North America and Asia Pacific, according to company officials.
Tony White, founder and CEO of Boston-based Ars Logica, said Sitecore’s products have been at the forefront of web experience management from a technology perspective. EQT’s investment will likely result in an aggressive expansion of Sitecore’s product line into a much wider range of digital marketing offerings, he predicted.
"Given Sitecore’s outstanding track record of executing on its product development plans," White added, "the expansion of vision that EQT’s investment will enable could easily result in Sitecore emerging as a leader — if not the leader — in the digital marketing space."
Beyond Web CMS
In its Web CMS Wave early in 2015, Forrester Research rated only Adobe ahead of Sitecore. Sitecore, a "strong performer" in the 2013 Web CMS Wave for Forrester, earned a spot as a leader in the 2015 report. Forrester analysts noted the company "has a strong product and high growth." Gartner also named Sitecore a Web CMS leader in its most recent Magic Quadrant.
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But Sitecore is more than a one-trick pony, analysts told CMSWire.
Ray Wang, founder and principal analyst at Silicon Valley-based Constellation Research, said the EQT investment comes a good time for Sitecore to further its investment into its e-commerce offering. Sitecore's e-commerce offering is part of a market that's "heating up." EMarketer estimated last year that around the world, digital buyers would spend $1.672 trillion on retail e-commerce sales in 2015.
"And," Wang added, "they’ve done a good job showing profitable growth. EQT allows them to fund the expansion they’ve needed to take it to the next level. The commerce space is heating up with the big boys looking for acquisition while players like Sitecore, Episerver, Elastic Path and Shopify leading the shift in the market."
Sitecore's is breaking out of the limiting IT budget associated with “web content management," and into marketing and digital business, said Jim Murphy, research director in Gartner's web and cloud group.
"The marketing technology landscape, though, is an incredibly dynamic, fragmented and innovative space, with startups and disruptive technologies arising everywhere," Murphy said. "In fact, some areas like 'content marketing' are a threat to the more traditional WCM establishment. Sitecore has been a leader in transitioning toward more of a business versus IT proposition while playing nice, from an integration, interoperability and partnering perspective, with established heavyweights and newer providers in the digital marketing landscape."
Sitecore, he said, will continue to invest in extending and developing its ecosystem and put itself into a position with more gravity in case the fragmented space consolidates.
"I expect also that they’ll seek to play a more prominent role in broader customer lifecycle, including service and support," Murphy told CMSWire. "I think they’ll also look to make the platform more accessible to developers of vertical industry solutions, and solutions for non-customer facing processes and initiatives."
Five Straight Growth Years
Sitecore last November reported optimistic financial results for the fiscal year ending in June. The private company reported that for the fifth straight year it saw 35 percent topline growth over the previous fiscal year. Sitecore has more than 4,600 customers operates in 23 countries globally.
“For several years, we have been following Sitecore given its leading market position, its strong technology offering and its impressive growth story,” Morten Hummelmose, partner and head of Denmark at EQT Partners A/S, an investment advisor to EQT, said in a statement.
Dominik Stein, partner and head of technology, media and telecom at EQT Partners GmbH, another investment advisor to EQT, said he's convinced that EQT’s industrial network and resources "can support Sitecore to capture its full potential."
The transaction is subject to approval by relevant regulatory authorities and is expected to close this quarter.
