Oracle + Aconex is a done deal
It was a long time coming because of all of the regulatory hurdles but Aconex is now a part of Oracle. A quick recap, and then why this matters even if you’re outside the typical AEC/construction world.
Oracle has been acquiring to build out its AEC offering since snapping up industry giant, Primavera, in 2008. AEC projects have many stakeholders, participants come and go, large projects may have hundreds of suppliers … planning, tracking, adjusting to real-world as-is conditions; managing contracts, change orders, submittals, payments — it can all be a mess if not carefully managed. Primavera emerged in the 1990s as the key technology platform used by many in the industry to manage the business side of projects. Oracle bought Primavera in 2008 for its reach into AEC and to extend it to other project-based industries. Oracle saw the potential to grow Primavera to an enterprise-level, to help AEC (and other) companies prioritize and select investments and then plan, manage and control projects and project portfolios.
Then Oracle acquired Skire for its capital program and facilities management applications — and because both were available on-prem and on the cloud. This was 2012, so the cloud bit was pushing technology’s outer limits and met resistance in the very staid AEC world. Oracle wanted to combine Skire and Primavera (which had 3 years of Oracle development and extension by this point) to create what Oracle called Enterprise Project Portfolio Management (EPPM), which spanned project lifecycles from capital planning to construction to operations and maintenance.
A couple more deals in between for payment processing, contract management and then … in late 2017, Oracle said it was buying Aconex, a collaboration platform that connects owners, builders and others involved in a project to improve visibility and data/document management. The goal, of course, is traceability, cost containment and a more consistent project outcome until handover, and then a better managed asset over its lifecycle.
Oracle paid $1.2 billion for Aconex, nearly a 50% premium over the share price on the day they announced the deal and about 10x annual revenue. Yup, that’s a healthy multiple and gets us to the why you should care, even if AEC isn’t in your wheelhouse:
- Everyone lists the construction industry in their target verticals — it’s slow to adopt technology and many companies will leapfrog generations of tech by investing today with cloud, AR and all of the other nifty stuff coming online. And by everyone, I mean many, many software and hardware vendors. Listing construction or asset operations as a target vertical isn’t in any way a differentiator.
- That construction is such a target industry is both good and bad. Lots of news/PR means it’s not so much an evangelical sale, but it makes it harder for any one company to be heard.
- Aconex is based in Australia, with a solid roster of clients in the Antipodes and South Asia. But it had a hard time growing in North America because of a perceived lack of local resources. Even a cloud product needs people in-country (or at least, in-time zone).
- Oracle brings both mega-IT backing for R&D and services resources and the surety that its cloud platform is as secure as they can make it. Cloud security is still an issue for many end-users, even if the IT community often sees it as a done deal.
- The big keep getting bigger, in part because it’s hard to grow a $40 billion brand at any appreciable rate without acquiring. Simply looking at the cross-selling opportunities at Oracle is mind-boggling. But that same logic applies to small companies, too: what can you sell into existing accounts that complements your current offering, but is just new enough to garner interest?
- How do you get a 10x revenue multiple, when our industry usually pays a more modest 6x or so? Creating profitable, consistent growth; setting a realistic and extensible roadmap; being a good strategic fit for a target vertical. It’s hard to say what caused Oracle to pay such a premium but I don’t expect it to be the new normal. A lot of potential acquirers tell me that expectations are just too high right now.
The inventors and innovators I speak with almost without exception start with the goal of being acquired for a vast amount of money. Aconex started in 2000, at the same time as dozens of other e-commerce and collaboration platforms, yet Aconex outlasted many of them. How? By building good products, bringing them to market one relationship at a time, and keeping an eye on technology evolution to stay ever-so-slightly ahead of their customers. There’s no guarantee for a 10x valuation, but this may come close.