Austin, Texas-based Activant targets SME users in four verticals: hardware and home centers, lumber and building materials, automotive parts aftermarket, and wholesale distribution. It said researchers at Dun & Bradstreet estimate that SME users in these verticals generate annual revenue of $437bn.
Activant bulked up its operations in February with the acquisition of Montreal, Canada-based Speedware Corporation for $97.2m. Even without Speedware, which increased its revenue by 72.9% in 2004 to $36.1m, Activant has a record of consistent, if modest growth. In the year to September 30, 2004, it broke into the black with revenue of $16.8m, up from a loss of $10m on revenue 1.9% higher at $225.8m. Even though income fell 27% to $9.2m in the six months to March 31, revenue rose 7% to $119m.
In the first half of its current year, revenue from hardware and home centers rose 20% to $35.9m, lumber and building materials saw an 18% increase to $18.9m, and wholesale distribution revenue rose 12.2% to $3.2m. The problem area for the company is the automotive parts aftermarket, its biggest market, where revenue declined 7.2% to $53.9m. The problem is likely to get worse. Activant said General Parts, one of its largest customers which accounted for 8% of revenue in the six months, is likely to replace its system over the next two years.
It also said that as it stops actively improving and selling several older systems, it has experienced reduced rates of customer retention that has been particularly evident in the automotive parts aftermarket.
This weakness was clearly the motivation for its acquisition in May for an undisclosed price of most of the assets of The Systems House, a company focused on the automotive aftermarket and office products industries.
Activant operates in a highly competitive market, particularly as former financial software players have added CRM, supply chain, and HR functionality so they can rebrand their offerings as ERP. Equally, traditional ERP players such as SAP have ceased to use that term as they have moved into the front office but have products geared to the SME sector, attracted by its growth potential. Activant quoted industry sources as forecasting that IT spending by businesses with less than 1,000 employees will grow at 8% in 2005, outpacing the growth in spending by larger enterprises.
It said that in wholesale distribution it faces competition from Infor Distribution Essentials, Prophet 21, and Intuit. Other companies in the markets it serves are Microsoft, Oracle, SAP and The Sage Group.
Activant has been funded by private equity company Hicks, Muse, Tate & Furst, and even after the IPO it will own more than 50% of its equity.
