Two of Salesforce's earliest ISV partners joined forces last week when quote-to-cash vendor Apttus acquired contract lifecycle management specialist Conga in a deal said to be valued at $715 million. The combined business becomes one of the biggest players in the Salesforce ecosystem, claiming more than 10,000 enterprise and mid-market customers who bring in annual revenues of $400 million — and adds a new twist to an already tortuous history.
Apttus and Conga can both trace their stories back to the earliest days of Salesforce AppExchange, when the cloud CRM giant first boasted that a new generation of software companies would build their offerings natively on its platform. Conga and Apttus each proved the truth of that early boast, initially bootstrapping their businesses until they separately reached a size that attracted external investment.
Now Thoma Bravo, the private equity investor whose intervention in September 2018 snuffed out Apttus's dreams of a blockbuster IPO, has snapped up Conga too, which had been acquired by private equity investor Insight Venture Partners in April 2015. Insight remains an investor in the combined venture, which takes the Conga name and will be led by Frank Holland, brought in as CEO of Apttus after the Thoma Bravo takeover.
Conga CLM, meet Apttus middle office
While the merger with Conga is the first acquisition Apttus has made, Insight had overseen a number of acquisitions at Conga. This broadened its footprint beyond the original Salesforce-native Conga Composer, which connects data from Salesforce into automated document creation and workflows.
First came an expansion into traditional contract lifecycle management (CLM) with the acquisition of Novatus in 2016. More recent acquisitions have added AI-powered contract analysis, digital process orchestration and trackable document sharing, while in-house development produced an e-signature add-on. The result is what Conga calls end-to-end digital document transformation (DDX) — automated digital collaboration that shepherds a core set of data throughout the lifecycle of interlinked commercial documents such as quotations, proposals and contracts.
Apttus offers much the same, but on a much grander scale and to a much smaller customer base of largely enterprise customers. It positions itself as a leading player in the middle office — all of the various operations and processes that sit between customer-facing applications like CRM and the back-office ERP systems. It too has its own CLM technology but combines that with configure-price-quote (CPQ), revenue performance management and B2B e-commerce to service a customer base of global manufacturing, technology and services companies. As well as its Salesforce-native applications, Apttus also developed versions that ran natively on Microsoft's Azure and Dynamics platforms.
The disappearance of the Apttus brand is perhaps unsurprising in view of the circumstances surrounding the Thoma Bravo acquisition. Shortly before the deal was announced, founding CEO Kirk Krappe had left the high-flying company abruptly. and allegations later emerged of "dysfunction and unprofessional conduct" at the company under his leadership. A clear-out of much of the previous leadership followed and Holland joined as CEO six months later, arriving after a twenty-year stint at Microsoft's Dynamics business software division.
Conga brings volume, Apttus has the big deals
Sheer numbers make up the other factor in the retention of the Conga brand. When I spoke to Conga at the time of its annual conference in early March — one of the last tech industry conferences to take place before the pandemic shutdown made such gatherings impractical — the company was saying that it had more than 11,000 customers and revenues at an annual runrate above $100 million. Given that the combined business is quoting a similar number of customers and yet a $400 million run rate, it's clear that Conga brings the volume business into the merged entity while Apttus brings just a few hundred six- and seven-figure contracts. The Conga brand is the one with the biggest reach.
That disparity in deal size nevertheless emphasizes that, while these two companies offer products that substantially overlap in functionality, they target very different customer bases. While there are some similarities in the proposition, how it is sold and delivered are at opposite extremes, with Apttus being much more of a complex, big-ticket implementation while Conga is designed for ease-of-use and quick wins.
So why has the acquisition happened now? Former Conga CEO Matthew Schiltz, who was appointed after the Insight acquisition and is now stepping back to join the merged company's Board of Managers, provides an explanation for the timing in a Conga blog post on the deal:
Our companies combining comes at a unique time. It’s a time when many are stepping away from opportunities like this. But in reality, we believe this is the perfect time, now more than ever, as businesses need digital transformation to keep moving forward. For example, the manual processes that were once conducted in-person and in-office came to an abrupt halt when the pandemic hit and we found ourselves limiting face-to-face contact and working from home. While we’ll all head back to our offices, the need for digital transformation has catapulted us from an aspiration, to a non-negotiable requirement. That’s where we step in.
This deal creates a big beast in the Salesforce ecosystem — almost certainly the largest Salesforce-native ISV in revenue terms (Apttus never made much progress with its Microsoft-based offering) — and answers the immediate question of what happens next with Apttus, while raising further questions about what follows. Given that Apttus already had its own CLM technology, the point of the acquisition seems to be to broaden its customer base. Schiltz is right to say that the current pandemic and lockdown will spur more investment in the kind of automation that Conga offers. What's also true is that it's almost certainly put a brake on the kind of large-scale implementation that Apttus trades in. Combining with Conga therefore opens up growth opportunities that will compensate for any slowdown that Apttus may have been facing in its core business, providing that the two businesses can successfully merge without customer disruption.
The other question in my mind is, how will Salesforce react to this? Salesforce took early investments in both companies — it's not clear whether it retained any stake either prior to or after the latest deal. The acquisition of Vlocity earlier this year demonstrated that becoming part of Salesforce is one of the few exit routes available to Salesforce ISV partners these days. Conga always seemed a likely candidate, given that its CLM offering is an obvious complementary offering to go alongside the CPQ and B2B commerce capabilities Salesforce gained in its acquisitions of Steelbrick and CloudCraze. But with the addition of Apttus, the price tag for bringing Conga into the Salesforce fold has risen sharply, making that unlikely to happen in the near future.
Perhaps Thoma Bravo still has its eye on a potential IPO when markets recover — the combined business is certainly big enough to justify an offering, depending on how the internal metrics look. Or it may simply be a diversification that protects the growth potential of its investment at a time of great uncertainty but also opportunity. Above all, it's a great hedge. If markets recover quickly, it will prove to be an astute buy. If things get worse, Salesforce will need to fold CLM into its Sales Cloud to help bolster its revenues, which provides a potential exit.