This week, Certinia (née FinancialForce) experienced a material ownership change, becoming the first enterprise technology investment made by Haveli Investments, a new private equity firm set up by Brian Sheth, the former President of Vista Equity Partners. Previous investors, Advent International and Technology Crossover Ventures (TCV) cashed out and have been replaced by Haveli with backing from General Atlantic. You can read the full Haveli press release here. The transaction is expected to close in early August.
An investment group led by private-equity firm Haveli Investments has agreed to buy business software vendor Certinia from Advent International in a deal that sources said was valued at nearly $1 billion including debt.
A change in investors isn’t always that big of a deal unless the new owners are likely to do something dramatic to the company, customers and/or employees. For example, some buyers just want to roll up one firm inside another larger firm and product line. Some acquirers just want the maintenance or annual subscription monies and may starve off a vendor’s other functions like marketing and product support. And, of course, there are ‘asset strippers’ who simply see the parts of a vendor as worth more than the whole firm. They’ll sell off the firm one piece at a time. This deal looks more like a liquidity event for the prior owners and a growth opportunity for the new investors. (Here’s a particularly deep and focused piece on these change-of-control business events.)
A bit of history
CODA was an UK software company that was founded in 1979 and acquired by UNIT4 in 2008 for around 213 million euros.
FinancialForce was established as a joint venture between Salesforce and UNIT4 in September 2009, which incorporated the Coda 2go software that was originally launched in December 2008. As of March 2019, 40% of the shares are owned by Salesforce and 60% by UNIT4. Het Financieele Dagblad estimated the value of the company at around 500 million euros, based on the 2019 annual report.
In March 2015, the company received $110M in funding from Technology Crossover Ventures and Salesforce Ventures.
On May 3, 2023, the company FinancialForce.com Inc. was renamed to Certinia.
But even that recap is missing some pieces. For example, in 2014, Advent International bought into the firm with a $50 million investment as part of broader investment in its then-parent company Unit4. In 2015, diginomica’s Den Howlett noted a further injection of funds: “Less than a year later and FinancialForce is announcing a further $110 million funding round, led on this occasion by Technology Crossover Ventures (TCV)”.
This week’s announcement sees the departure of those two 2015 investors and the addition of two new firms. Salesforce’s investment in Certinia remains. Given that many private equity (and venture capital) firms want to see a liquidity event in the 3-5 or 5-7 year window, this transaction was likely overdue in coming. It’s almost two years since Advent International sold off its larger stake in Unit4.
What about Salesforce?
In an exclusive interview for diginomica, Phil Wainewright asked Scott Brown, CEO of Certinia, about the relationship with Salesforce, which has been an investor since the company’s inception. According to Brown:
It was very important to me that Salesforce continued to be an investor and supporter of our business and continue to be actively working with us. So I was thrilled when they made the decision to continue their ownership interests and continue their support, which has been phenomenal.
Our relationship with Salesforce is really a 360-degree relationship. It's not just that they're an investor. They actually run their entire professional services organization on our system, on our technology. We are probably the poster child of people that develop on their platform. We develop everything in Salesforce’s native Apex code, we use Einstein and we use Lightning and all those types of things. And then obviously they’re a go-to-market partner providing leads and demand gen and joint activity. So, there's a lot of dimensions in the relationship.
The new owners
Haveli is a relatively new firm in the private equity business. It was founded in 2021 but already is looking to place investments north of $3 billion in total. As noted above, Brian Sheth, the founder of Haveli, is a former Vista Equity top executive. Vista is noteworthy as it has made a number of investments over the years in enterprise software. Those investments almost always have performed well for Vista and its investors. Part of that is due to Vista’s use of its ‘book’ — a number of best practices the company has compiled over the years and insists that its portfolio companies follow. I’ve spoken with several CEOs of Vista-owned firms and each, to the one, has seen their firm grow significantly under Vista’s tutelage.
Whether Haveli can replicate this is the question du jour. However it is working with a brand-new fund and therefore has deep pockets, which may prove useful should Certinia find itself looking to expand or acquire.
General Atlantic is a giant in the space although its investment is secondary to Haveli’s in this deal. General Atlantic has investments in enterprise software firms like Coupa, Odoo, Visma, Automation Anywhere, HireRight and others. Its technology investments go back over 30 years.
One source indicated that no changes in Certinia management/leadership are anticipated as a consequence of this ownership deal. Likewise, customers of Certinia should not expect any material changes to Certinia’s products either.
Certinia’s Brown reinforced the ‘stay the course’ message. He told Phil:
When I was brought in, my job was to drive growth, to drive the company to profitability, to make sure that we have very low churn and high NDR [Net Dollar Retention]. We have all those things happening today.
As we look ahead, we're going to continue with the plans we have in place — more international expansion, we've introduced three new products in the marketplace that are doing really well. So we're focusing on the continued expansion of those products, and then continue to refine our operating model …
Once we get past closing, we can sit down with Haveli and begin to do more detailed planning. But the go-forward — and I had an all-hands with the team yesterday — is no change. Nobody's job changed. Nobody's charter changes. Nobody has any changes to what we're doing in the operating plan. And our second half, we're just finishing up our Q2 right now. So, it's business as usual.
Already some of Certinia’s competitors are seeing this deal as an overall positive — especially in the PSA (professional services automation) space. Owners like General Atlantic — and the deal valuation itself — point to more growth to come. Certinia is a native Salesforce.com set of solutions and uses much of Salesforce’s Force.com platform. As long as Salesforce continues to grow and expand, Certinia should do so, too. PSA, compared to ERP, is a relatively new application software space and one that may see more market growth for many years to come.
Additional reporting by Phil Wainewright.
An earlier version of this story included a direct quote which has been withdrawn.