Published: February 8, 2012
Guidance Software announced its acquisition of SaaS review provider CaseCentral today. Let's look to the happy couple's future. Now that they've found love, what are they gonna do with it? Existing synergies The companies' recent roadmaps seem to have been on similar courses.
Integration plans Guidance plans for the products to be integrated in 3-6 months, eventually allowing users to send data seamlessly to CaseCentral for review through FTP. This raises questions about the viability of transmitting the largest e-discovery data volumes over a wire in an adequate timeframe, though Guidance points to its EnCase filters' ability to winnow data down considerably prior to review.
Moreover, all "data about the data" from EnCase - such as legal hold status, collection time, etc. - will be mapped to CaseCentral's platform and available to outside counsel, to improve collaboration between enterprises and law firms. This builds favorably on CaseCentral's existing process analytics capabilities, for added transparency in project management and reporting.
Rationale Cross-selling opportunities abound. Guidance is a well known quantity, boasting EnCase Enterprise usage by 60 of the Fortune 100. CaseCentral's revenue base is largely made up of enterprise litigants doing repeat cases, unlike many other review vendors (but similar to an increasing number of service providers). According to a recent press release, "strategic enterprise eDiscovery revenue has been growing with a CAGR of 45% since 2009 and now represents over 75% of CaseCentral revenue versus single event, ad hoc business." Both, too, have law firm traction: Guidance was used by 13% and CaseCentral by 8% in the 2011 AmLaw Tech Survey (competitor Clearwell Systems, at 46%, was the most-cited). Other potential benefits:
Financial details A look at the numbers from the press release:
"Under the terms of the agreement, Guidance Software will acquire CaseCentral for upfront consideration of approximately $17.1 million, consisting of approximately $8.3 million in cash, $8.3 million in Guidance Software common stock, and the assumption of $0.5 million of debt, net of cash. Depending on CaseCentral's SaaS revenue growth, Guidance Software may pay up to an additional $33 million in cash over the next three years. The transaction is subject to customary closing conditions and is expected to close during the first quarter of 2012. Guidance Software expects the transaction to add approximately $10 million in SaaS revenue in 2012, and to be slightly dilutive to slightly accretive to 2012 non-GAAP EPS and accretive to 2013 non-GAAP EPS."
A possible long-term price tag of $50m (depending on revenue growth for the next three years) would provide more return on the total $22m in funding the company has received, but still puts the deal only a bit above Interwoven's July 2008 acquisition of Discovery Mining for $36m, and well below more recent transactions.
CaseCentral's revenue details are not available as of this writing to calculate a multiple. Guidance, which reported 2011 revenues of $104.6m, expects the deal to add $10m in SaaS revenue for 2012.
*All views and opinions expressed in ESG blog posts are intended to be those of the post's author and do not necessarily reflect the views of Enterprise Strategy Group, Inc., or its clients. ESG bloggers do not and will not engage in any form of paid-for blogging. Click to see our complete Disclosure Policy.
Browse by Content Type