Rand and Avatech merge in reverse

Surprise! Rand Worldwide and Avatech Solution announced on Tuesday that the companies have been combined in a reverse merger. A reverse merger is often known as a “reverse IPO” because the acquisition of a public company by a private one avoids the costly process of going public. As a result of this deal, the combined company intends to call itself Rand Worldwide and will seek to trade on the OTC under a new symbol. The new company has named Marc Dulude (CEO of Rand) as the chief executive officer of the combined company, and Larry Rychlak (President and CFO of Avatech) as the president and chief financial officer. George Davis, (CEO of Avatech), will remain on the board of the combined company. The combined company is Autodesks’s largest global reseller, covering the US, Canada, Singapore, Malaysia, and Australia. All Autodesk-related services and sales in the new company will be combined under the IMAGINiT Technologies brand. The new Rand will continue Rand’s sales and support of PTC, Dassault Systèmes, and Autonomy products. Commented Mr. Dulude in the press material about the merger: “With little geographic overlap between the businesses today, the combination of Rand Worldwide and Avatech allows us to leverage the full range of selling and technical resources of each of the companies to enhance the service delivered to our clients. We believe that clients in all of the geographies we serve will reap the benefits of the very deep bench of technical service capabilities that will result from combining the two companies. Also, the ability to deliver the additional products and solutions that each company has to its respective customer bases represents an attractive cross selling opportunity.” According to Tuesday’s press release, Rand and Avatech had revenue of about $82 million over the last 12 months. As far as I can tell, the combined company will have 51,400,844 shares outstanding; at Tuesday’s closing price of $.75, this values the combined company at about $38 million. But I could be wrong — the transaction is really complicated. The companies have submitted an 8-K filing to the US SEC that explain the deal — I’ll update if necessary when I’ve read through all of it. Those with long memories may recall that Rand was a public company trading on the Toronto Stock. In its heyday in the 1990s and early 2000s, countless small and regional VARs pitched their businesses at Rand as an exit strategy — many of those entrepreneurs wanted out. Rand expanded too quickly; that, combined with a deteriorating relationship with PTC, caused the company to run into hard times in the mid-2000s. In 2007 the company was acquired and taken private by Ampersand Ventures. Ampersand had already been an active investor CAD/CAM/CAE/PLM companies, investing in Moldflow and Eigner (which was bought by Agile, now part of Oracle). The combination of Rand and Avatech makes sense. Ampersand needs an exit, and a reverse merger will enable it to sell shares without an expensive and time-consuming IPO. Being a reseller is tough in the best economic times; in uncertain times these companies are the most vulnerable in all of PLM. By combining forces (under strong management) the new Rand should be able to weather whatever is coming.