Silver Lake expands their energy software & ETRM portfolio
Quorum Business Solutions (Quorum) and Silver Lake Partners, a global private equity investment firm, announced that Silver Lake and its energy and innovation strategy arm, Kraftwerk, have agreed to acquire Quorum from The Carlyle Group and Riverstone Holdings for an undisclosed sum. As noted in the press release, “Silver Lake’s capital investment will support Quorum’s continued growth and market leadership, including strategic acquisitions to enhance its functional capabilities and scope of products and services.” This latest investment is the second in less than a year for Kraftwerk in the energy software space, following their investment in Eka in October of 2013. It also marks Silver Lake Partners second investment in a energy software business, as the company continues to hold an interest in SunGard and its ETRM group, SunGard Energy, following Silver Lake’s participation in that company’s leveraged buyout back in 2005.
I was asked this morning if, given that Kraftwerk does now hold a substantial position in both Eka and Quorum, would it be reasonable to assume that the company might seek to somehow leverage those two investments? I think the short answer would be “no”. Quorum, despite having acquired Woodlands Technology earlier this year, had not been active in the ETRM space and focused instead on the very active and lucrative upstream oil and gas space in North America. While the Woodlands acquisition has given the company fresh ETRM capabilities, Quorum continues to invest in cementing their leadership position the upstream market and will most likely look to leverage that customer-base for sales of their ETRM product. Eka, on the other hand, has come out of the agricultural trading markets, primarily in the Asia/Pac region and has been focusing on the ag-heavy commodity management space; and have only recently begun to ramp-up their efforts in the energy markets with the acquisition of Calgary-based Encompass in April of 2013. While both of these acquired ETRM products do have a number of customers each and do show good promise for future revenue growth for their new owners, both will take a bit more time and investment before they can compete on a global basis in all energy commodities against the largest ETRM/CTRM providers. So, given that Quorum is focused on the upstream oil and gas markets and Eka on the commodity management segment (with energy trading as an extension of that strategy), there would not appear to be much overlapping, adjacent or otherwise leverageable capabilities at this time. Its also informative to keep in mind that Carlyle owned both OpenLink and Quorum for several years prior to their selling OpenLink in 2011, and there was no movement by Carlyle to leverage the two firms; even though it could be argued that with Quorum’s strength in the upstream space and OpenLink’s in the energy trading space, there could have been a number of very interesting integration points that might have proven very valuable for oil and gas producers, and particularly those in North America.
So, despite the coincidental ownership of two company’s that do compete to varying degrees in the ETRM space, I think the decisions to buy into each of these company’s were based solely on the merits of each, not part of a larger strategy of creating something bigger from the two. But, of course, time will tell.
BTW, I’m also hearing of yet another potential acquisition in the works…
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