Battery Ventures has sold Forterro to Partners Group for €1 billion. Enterprise Times spoke to Dean Forbes, CEO of Forterro. Forterro is a group of ERP products and companies that provides ERP software and solutions to the mid-market manufacturing sector in Europe.
It is not a well-known brand but with a billion-dollar valuation and a focus on growth; expect to hear more about it in 2022. The deal was signed last week and is expected to close shortly, subject to clearances. Battery Ventures will completely exit Forterro upon completion, which it first invested in during 2012.
Dean Forbes, CEO of Forterro, stated: “Over the past year, we have spent a great deal of time developing strategies for growth and investing in the people and infrastructure we need to achieve a brand new vision—something we’ve been calling ‘Forterro 3.0’. The final piece of the puzzle was partnering with an investor that would share this vision with us, and Partners Group is the right partner for us.”
After nearly a decade of investing in Forterro, why did Battery feel the time was right? Dave Tabors, a private equity partner at Battery Ventures, commented: “In many ways, that strong growth means the company is now at an inflection point. Forterro’s performance as part of our software-buyout strategy has been notable, and we are honoured to pass the lead to Partners Group for its next chapter.”
Explaining Forterro 3.0
Enterprise Times asked Forbes to explain the first two phases of the company.
“The Jeeves acquisition. In that acquisition, many things were done that made Jeeves a much stronger business that allowed Jeeves to thrive ever since then. We refer to that as 1.0, the genesis of that playbook.
“Then that playbook was applied to the next nine companies that the team bought. Quite similar profile of business, similar playbook for value creation, similar approach to sales and marketing and go to market, that happened in 2.0, and that’s the company expanded across Europe. Now, we’re to build on everything that was done in 2.0, but bring some new, some new aspects to the strategy.”
What is the strategy for 3.0?
“There’s a lot of opportunity for us. We’ve got a great opportunity to slightly adjust what organisations we buy because now we’ve got 10,000 customers, the cross-sell and upsell opportunity is immense. We can bring a lot of value back to those customers. Then there’s a geographic expansion; there are a few places where we’d like to be stronger in Europe and a few places where we’re not present in Europe. We’d like to change that.”
Forterro will continue to target the smaller cloud manufacturing ERP vendors in different countries. It will also look for a more horizontal solution to complement its existing products. Geographic expansion through acquisitions such as the two recent ones, 123 Insight (UK) and abas Business Solutions Bulgaria Ltd (Bulgaria).
The deal comes after a very successful year for Forterro. With revenues approaching €200 million and an EBITDA of €60 million. Forbes added: “We are ready to become more than the sum of our parts. We join with Partners Group today to begin a journey toward becoming a unified, subscription-based and cloud-ready ERP platform with a broader range of capabilities that will more deeply serve the industrial midmarket.”
While Forbes revealed that acquisitions would continue, Enterprise Times asked him about the balance between Sales and Marketing, R&D, Acquisition and channel.
He replied: “We’re investing more in sales and marketing and product this year, both in net terms and as a percentage of revenue than we’ve ever done before in the company’s history. There’s a much stronger front foot focus than we’ve had in recent years. I expect to be busier in both quantum of value and a number of businesses on M&A this year than we were when we bought four companies.”
Why Partners Group?
Forbes joined Forterro exactly a year ago, and one wonders when this process started.
He commented: “Before I joined, I talked to Battery at length about their aspirations for the company. They have been in 12 years, which is a long hold for private equity. We all agreed that to maximise freedom, a new sponsor was needed. At the time, we thought that would take two years. A lot of good things happened that allowed us to do it.”
Why Partners Group?
“We had a handful of Europe’s elite technology investors. Partners won out on a number of fronts. They shared the vision and passion we’ve got for the next five years. They’re going to back our M&A strategy. Just culturally, we were incredibly aligned along with the fact they paid the right number.”
Partners Group, which also invested as a minority shareholder in Unit4, recently clearly sees ERP as a growth market.
Bilge Ogut, partner and head of private equity technology at Partners Group, commented: “Forterro has been on an incredible journey, evolving from a Nordics-based on-premise manufacturing ERP vendor to an extremely well-run, pan-European group of specialised ERP businesses.
“We came to the table confident in the quality of Forterro’s products and the people behind them. However, it’s the group’s prospects for growth—underpinned by its exceptional 2021 results—that has us really excited about our path forward together.”
Enterprise Times: What does this mean
As Forbes indicated, this deal will start a new chapter in the history of Forterro. Forterro is building a strong portfolio of cloud-based manufacturing ERP solutions in the same way that Epicor and Infor did historically for on-premise solutions. It took both Infor and Epicor decades to bring them together into a set of coherent cloud solutions. It will be interesting to see how Forbes addresses the challenge.
One thing is sure, there will be more acquisitions from Forterro. Ones that expand its footprint in Europe and will help make its brand better known to a much wider audience. The price tag of 5x revenues seems at the low end, but it may enable Forbes to get more funds to invest if he finds the right opportunity. The inference is that the acquisitions may indeed get bigger.