It was announced last week that field service management vendor ServiceMax is on a path to the public market, via a merger with special purpose acquisition company (SPAC), Pathfinder Acquisition Corp.
The deal values ServiceMax at approximately $1.4 billion. However, what's particularly noteworthy about the agreement is that none of the existing shareholders - including private equity firm Silver Lake. GE and Salesforce Ventures - are selling any of their equity ownership in the firm. In other words, no party involved is cashing out.
It has been an interesting path to IPO for ServiceMax, which started out as a fast growing start-up over a decade ago. It then was acquired by GE, before being sold off to Silver Lake as its majority shareholder in 2019. GE still owns a stake and since then Salesforce Ventures has invested money in the company (ServiceMax is built on the Salesforce platform).
With all this activity, it's not surprising that the topic of ‘ownership' has come up time and time again for ServiceMax. This has been amplified in recent months as the relationship between ServiceMax and Salesforce grew even closer, as the pair agreed to bring a product to market together - Asset 360.
There was speculation on the news of the IPO last week that this could be somewhat of a tactical move to boost ServiceMax's price tag, ahead of any sort of speculative acquisition by industry chum Salesforce. However, that is not the impression given to us during a conversation with ServiceMax CEO Neil Barua.
In fact, Barua is very dogmatic in saying that going public is about growing a long-lasting company and getting the capital in play to invest in supporting millions of field technicians around the world, which need digital field service tools more than ever before, thanks to the ongoing COVID-19 pandemic.
For example, Barua says:
I'm not here, very clearly, to get a quick buck out of this company. Based on the last few years of looking at these field engineers, who need a domain expert to provide them with the right tools, we have an opportunity to build a great company that will last a lifetime.
This is a rare opportunity to do that, being public. And the intent, I want to be clear, for myself and the board of directors, is to grow this extremely large, prominent company and serve these customers well by doing so with that focus and mindset. I'm super excited to be a public company CEO, as is my team, and we intend to really accelerate that over the next number of years, if not decades.
Equally, Barua says that this IPO is about the customers and that ServiceMax is solely focused on getting the right tools in the hands of field service agents that need them. He adds:
We see 8 million technicians in our world that need the digital tools that we've been providing for 14 years, innovating on and aggressively getting out there. We are obviously a small percentage of that, as are our competitors, because most of those 8 million technicians are still using manual processes.
So, job number one is executing on a great product that we have, whether it be ServiceMax's Core offering, whether it be Asset 360 with Salesforce, whether it be via partners, and getting those 8 million technicians the tools they need.
As noted above, ServiceMax has opted to take a non-traditional route to IPO via a SPAC, which typically provides a faster path. Which begs the question, why now? And why is the speed of the deal important? Barua has a number of points to make on this front.
Firstly, he says that the board of directors asked Barua and his team if they are ready to go public - which he said they were. Secondly, they asked how quickly ServiceMax could make this happen, with the SPAC being the most aggressive option in terms of timeframes.
However, the speed is being driven by a couple of different factors. Firstly, whilst most of the world went into lockdown during the pandemic, field service technicians and engineers continue to be out doing their jobs - which are now more important than ever to keep things running. Barua explains:
Probably the most important reason on ‘why now?', is that the pandemic truly highlighted that those folks that we have been serving with digital tools broadly need the same sort of digital tools that people like me and you need. I've got multiple different ways in which I interact with my teams. The people that are keeping the world running, they need those too. This is an acceleration to serve those customers in the best way possible.
Knowing that there is a unique opportunity before it, Barua also highlights how new capital raised can play an important role for ServiceMax over the coming months. For instance, in addition to the IPO announcement, ServiceMax also revealed that it would be acquiring LiquidFrameworks, a leading mobile field operations vendor, specializing in the energy industry. Barua says:
[The IPO] gives us $335 million of capital, allows us to buy LiquidFrameworks very quickly, and gets us going in the public domain with expediency.
Our mission has always been to serve and build great technology for complex assets around the world. Clearly, oil, gas and energy have complex assets. We were already in the market with several customers and we've known LiquidFrameworks for a long time and we've spent a lot of time with them over the last few years.
We realized that they have even more depth in the oil, gas and energy segments. In addition they're built on the Salesforce platform, which makes it very simple for us to do integration and have a seamless experience for their end customers. They bring deep domain expertise in a segment that we enjoy, like and want to get deeper in. And their technology stack makes it simple for us to team together.
Barua says that M&A will play a role going forward and that ServiceMax will acquire "opportunistically" where it identifies a need in vertical industries that fit its profile. Some of the markets that Barua mentions include: medical devices, life sciences, industrial manufacturing, high tech manufacturing, building and facilities maintenance, power and utilities.
However, ServiceMax will not go after ‘shiny new verticals', but instead would rather go deep in verticals that it already has customers and continues to penetrate.
In addition, ServiceMax is thinking about geographies it could expand into and speeding up product development. Barua says:
We want to get deeper into geographic markets. We're strong in most theatres around the world, but we can get stronger and more resources into the regions where we see demand - so we now have an ability to do that.
And on the product roadmap, can we accelerate some of those features? Can we actually get things done faster if it's the right thing for our customers? We keep executing on this game plan and now it's supercharged with a lot of capital behind us.
Don't get distracted
To reiterate, Barua was adamant during our call that his focus now is to not get distracted, to continue to focus on the needs of ServiceMax customers and that the field service industry as a whole has a huge opportunity ahead of it. He says:
It's high time we as software companies, as technology companies, acknowledge these workers. The inspiration here is that we're going to be the leaders at ServiceMax to do this, now that we've got the full capabilities, all the ammunition artillery, to go arm these people with the tools that they need.
The industry is vibrating now. There's going to be plenty of winners. I love our competitors, we're going to be better than our competitors, but this is going to be great for everyone because it's going to create prominence.
Barua adds that the IPO has quickly shone a light on the value of the industry and he notes how a number of companies since the announcement ‘have come out of the woodwork'. But his primary focus is customer first. Barua says:
Our mission is to focus on the technician and not get distracted by the shiny toys. Because there will be a lot of shiny toys. In the last 24 hours I've had more companies approaching me to say, ‘hey, can we maybe think about an acquisition here?'.
We've got to stay very disciplined and stay focused on those 8 million. Only do things that give those people value and that's the important thing right now. Let's celebrate today, but tomorrow is day one of the new ServiceMax, we've got to be better. The bright lights are on us and we've got to step up to be a better company because of that.
The main message is: this is about you, the customers. I'm a very loyal person and we are now going to do more for you. Customers got ServiceMax to this pivotal moment and this is all about providing value to them and allowing them to have the things that will run their business better.
Barua is clearly excited about the IPO - and rightly so. As he says, the past year and a half has highlighted to many people the valuable work that field service technicians and engineers do on a daily basis. With their work becoming even more pivotal, a focus on the tools that they use is inevitable. Whilst the question of ownership and the relationship with Salesforce will always hang over ServiceMax, it's ultimately not that important at this moment in time. As Barua notes, what's important is developing products that make the jobs and lives of these field agents easier - and being the best at doing that. We look forward to watching this soon-to-be public company grow and following the work of its customers closely.