According to a PwC report, 32% of CFOs have changed their M&A strategy since COVID-19 appeared in March of 2020. There is evidence that after any market crash M&A activity surges.
“Most companies are still in the early days of assessing the impact from the Covid-19 crisis on their business. But as they begin planning for the future, there may be opportunities to make one or more long-sought acquisitions”, says Brian Salzberg of EY in an article for HBR. In some spaces like retail, companies may be looking to ‘fix and sell’ the acquisitions they make while others want to incorporate organizations as subsidiaries of a parent company or merge completely and run as one organization.
When it comes to technology companies, M&A activity has become so popular that the term ‘techquisition’ has emerged. For technology companies, the predominant reasons to acquire another company tend to fall into two areas – eliminate competition or expand on the product offering in an efficient way, without needing to build it in-house.
In this short interview, we speak to Ryan Fugate, VP Corporate Development for Aptitude Software, about Aptitude’s M&A strategy, changes that have arisen as a result of COVID-19, what he is looking for in a potential acquisition and how any acquisition activity will affect the Aptitude Client base. We will also be asking him about the product strategy and roadmap going forward – including Aptitude’s significant ongoing investment in technology.
Q: Ryan, talk us through your career so far at Aptitude Software:
I joined Aptitude Software’s product team in the revenue recognition space. I was initially focused on helping large, multinational telecommunications companies clear the significant hurdle of IFRS 15 and start driving value beyond compliance.
In 2017, Aptitude acquired leading Silicon Valley revenue recognition software company, RevStream. I worked closely with the team from RevStream after it was acquired, helping to strategize and build our vision for a comprehensive revenue management offering.
My experience with regtech put me in a good position at that point to build out the Aptitude Software IFRS 17 Solution, which was recently launched at the time. After a few years on the market, that product is now very well-established, with clients implementing the solution across 46 countries.
Most recently, I have moved into a role working very closely with our CEO, Jeremy Suddards, CFO and deputy CEO, Philip Wood, and CTO, Tristan Atkins. The role is focused on corporate development and part of my role is to look into potential acquisition targets for Aptitude Software.
Q: Your current role is increasingly important to the future of Aptitude Software – what is guiding your approach?
I try to keep revisiting our purpose, mission and vision as I consider opportunities and make decisions. Aptitude’s purpose is to create a world of financial confidence. For our clients, our employees and investors. We focus solely on the office of finance and our expertise is accounting and financial reporting. We sit at the intersection of finance and technology – and we are the only software company to have that sole focus.
Our product portfolio exists to enable the digitization of the finance department, to automate complex calculations and processes, and to enable the use of data for forecasting and business decisions. We are best at solving high-volume, high-complexity problems, and always looking to complement that core strength with new capabilities.
And I often refer back to Aptitude’s four pillars of digital finance transformation. We have seen a consistent journey for evolving finance functions – it often starts with Smart Compliance, for companies that take a long-term and scalable approach to solving complex compliance problems. They find that automated solutions give them more control beyond pure compliance, and their unified data allows them to drive greater Operational Intelligence about how the business is functioning. Ultimately, they start to use this data in more advanced ways to drive Strategic Foresight and make proactive decisions about how the business should act in the future. We see value unlocked as CFOs establish each of these pillars, and our acquisition strategy is looking for ways to help make the journey easier and increase the benefits realized every step of the way.
Q: How does M&A activity fit into the overall portfolio strategy?
We want to expand the portfolio in a way that retains and ideally augments our focus on the office of the CFO and aligns with the mission I just spoke about. We’re constantly challenging ourselves on building versus buying as we expand our portfolio. All of our products have very strong development roadmaps in place and that is something we don’t want to distract from unless we can add significant value over and above our current development priorities.
One of our core principles in product management is to build ‘products for markets,’ both to ensure we are delivering real value to a range of current and future end-users, and also to give our clients confidence that in using our products they will benefit from the best practices in place across their entire industry. We take a similar view when considering M&A – how can we drive value not just for one solution or one product, but instead to help take our entire product portfolio to the next level to add value for the existing client base as well as new prospects?
And we are working “portfolio-first”—another product principle—with the creation of an integrated portfolio. Aptitude is investing in our own development today – taking our existing product portfolio to SaaS, evolving our tech stack, breaking complex products into reusable components, deploying our solutions using containers, and more – so M&A is really a part of the strategy but not the whole strategy. We have an extensive roadmap and are working on an exciting new product suite which will all be cloud native and modular, with thoughtful UX at its core.
Q: Acquiring another company can cause challenges behind the scenes – particularly around technology and processes. What proactive steps can companies take to make the process as smooth as possible?
One of the drivers of our Aptitude Accounting Hub is to ease the complexities of M&A. Our clients find that AAH, with its built-in subledger is very useful to have post any kind of M&A activity – as it can provide group CFOs with a complete view of finance – at both the entity and group level – with the ability to drill down into details. We work with a few clients where M&A is key to their business strategy and it can be a positive experience with the right tooling.
I know when Aptitude acquired RevStream back in 2017 it was important that they fit well within our overall product portfolio. The solution was designed to help companies comply with an accounting regulation and it had the ability to provide benefits beyond compliance – which aligned perfectly with many products already in our portfolio. Now Revenue Management accounts for over 40% of our client base and we have clients who are leveraging the AREV Product alongside other Aptitude products like the Aptitude Lease Accounting Engine. So not only has the product created value for us as an organization, but now clients can benefit from a combined offering.
For some, the COVID-19 crisis has pushed organizations to leap forward in their digital strategies, for others it has or put the brakes on longer term much needed strategic investments. But if your M&A strategy post-COVID includes investing to acquire some harder hit but sound organizations you may want to think what you can do now to make post Covid M&A smoother, easier and much more effective.
Aptitude Software remains in a strong financial position and continues to add focus entirely on its onlyness. Unlike competitors, Aptitude is entirely focused on producing finance and accounting software for the office of finance. The deep expertise and specific knowledge that comes with this provides unmatched control and insight so that clients can meet their goals. Aptitude is continuing to expand its portfolio both organically and potentially via new acquisitions that will always be focused on outcomes for clients.
Aptitude understands the complexities of M&A from both the product and business perspective, and will continue to have a mature and constructive approach to value driving M&A.