Prophix chief executive officer Alok Ajmera said in an interview his company decided last year to bring on a financial backer to give it the option to do bigger things.Carlos Osorio/The Globe and Mail
Mississauga-based Prophix Software Inc. has bought a Belgian company in a deal that expands its global reach and product offerings, adding to a record tally of foreign acquisitions by Canadian technology companies this year.
The financial budgeting and forecasting software provider said Wednesday it had acquired Sigma Conso, a Brussels-based company that also serves corporate finance offices. Terms were not disclosed but a source familiar with the deal said Prophix paid US$100-million-plus.
Sigma generates €15-million ($21.5-million) in annual revenues and is increasing online subscription income by about 70 per cent a year. Seller Fortino Capital picked up a majority stake in the Belgian company in 2020, paying between €5-million and €35-million, La Libre Belgique reported last year.
U.K. private equity giant HG Capital buys Mississauga’s Prophix Software
The source said British private equity firm Hg Capital – which bought Prophix in January – helped pay for the deal through a fresh equity investment into Prophix in the high tens of millions of dollars, with the balance funded by the company’s cash and debt. The Globe and Mail is not identifying the source as they are not authorized to discuss the matter.
Prophix chief executive officer Alok Ajmera said in an interview his company – which took no outside funding for years as it grew into a leading vendor of “corporate performance management” software – decided last year to bring on a financial backer to give it the option to “do things bigger that we probably wouldn’t have dared to on our own.”
That included making acquisitions. Mr. Ajmera said his 380-person company, which generated more than US$50-million in revenue last year, began fielding calls from potential sellers after the Hg investment was announced in January. “We had meetings with pretty much every CEO in and around our space.”
Mr. Ajmera said he saw Sigma as an ideal partner for two reasons: Its 600 customers are primarily in Europe and Asia, where Prophix has little presence. The Belgian company also specializes in helping finance departments do financial consolidations as part of their reporting, a new area for Prophix, whose software is used by the same customers to do budgets and forecasting.
Sigma “is less about planning into the future and more about looking backward,” he said. “It filled a product gap, gave us a breadth in the office of finance, and accelerated some of our geographic expansion plans.”
Hg partner Ben Meyer said his firm’s original thesis for investing in Prophix was based entirely on growth from its existing business and that the acquisition opportunity arrived “way earlier than any of us were anticipating.” But he said the opportunity for Prophix to expand its product mix and geographic presence “is doubly strategically additive to what we had going on. Those two things get me excited.”
The deal builds on a record number of foreign acquisitions by Canadian tech companies this year, fuelled by an unprecedented flood of public and private capital into the sector. As of Tuesday, Canadian technology companies had announced 224 deals so far in 2021 valued at US$6.8-billion, surpassing the previous full-year record of 183 deals in 2000, according to Refinitiv.
The list of Canadian buyers abroad includes Lightspeed POS Inc., SemiosBio Technologies Inc., Coveo Solutions Inc., Themis Solutions Inc. (Clio), Tophatmonocle Corp., 2ndSite Inc. (better known as FreshBooks), Magnet Forensics Inc. and Hg-backed Intelerad Medical Systems Inc.
Canada’s tech sector has accounted for 21.9 per cent of all foreign acquisitions by domestic companies this year, which, if it stands, would be the highest level since 27.6 per cent in 2000. By contrast, technology accounted for less than 15 per cent share of outbound deals from 2002 through 2019, according to Refinitiv.
Foreign buyers have also remained active in Canada, paying US$10-billion for 285 deals this year.
The flow of capital “especially foreign capital, into Canadian companies, is emboldening organizations to go out and make these types of large-scale acquisitions,” Mr. Ajmera said. “It’s great to see Canadian technology companies moving around the globe and acquiring. It’s unfortunate that it has to be foreign capital; it would be nice to see more Canadian capital flowing. But capital is so easy to access. That is why a lot of deals are happening.”
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