The Impact of M&A Activity on the Indiana Tech Ecosystem
Hoosier companies are now more often the acquirer than the aquiree
TechPoint regularly tracks and reports on investments and M&A (mergers and acquisition) activity in the Indiana tech ecosystem within our Quarterly VC reports, including the most recent report. Sometimes, however, it’s good to step back and focus on what is happening over multiple years. This report will take a deeper look at the M&A activity from the first quarter of 2022 going back to 2019. If you’re seeking a detailed list of all of the transactions, I encourage you to read the quarterly reports.
[Editor’s Note: TechPoint reports only on deals that are publicly shared and some information may not be included due to privacy restrictions and/or nondisclosure by the parties. Most of the data utilized in this article came from our previous reports.]
During this three-year+ period, there were 135 M&A transactions publicly reported by technology companies based in Indiana or with a significant presence within the state. There were 32 transactions in 2019 and 32 transactions in 2020. The total number of transactions jumped to 57 in 2021, the most prolific year for Indiana tech companies to date with regard to raising capital and M&A transactions.
Through the first quarter of 2022 there were 14 M&A acquisitions reported and another nine transactions were coined as mergers between two or more companies. If that pace holds, this year’s total M&A activity will end up being similar to 2021 performance. It’s also interesting to note that of these 135 deals, 66 of them had Indiana companies as the acquirer and 60 as the company being acquired. While the dominant perception persists that Indiana is a shopping mall for larger coastal tech firms, the data tells a story that has Indiana firms as the acquirer more than half of the time in M&A deals.
Acquisition begets acquisition
Usually, when a company is acquired by another company or receives significant capital infusion from an investment firm (e.g. private equity firm or growth equity firm) it’s considered a successful outcome, or exit, by the owners of the company (including their existing investors). In some cases, these companies go on to acquire other companies for talent, product, customers and adjacent market opportunities, as part of their overall growth strategy. JMI Equity, a private equity firm with offices in Baltimore, Washington D.C. and San Diego, has made several key investments into Indiana tech companies in the past three years that are fueling their growth.
For example, in September 2020, JMI made an undisclosed investment into Indianapolis-based Bloomerang, and then little more than three months later, newly capital infused Bloomerang announced its acquisition of Kindful, based in Nashville, Tenn. Greenlight Guru announced a $120 million investment from JMI in June 2021, and Greenlight Guru has followed this up with three acquisitions so far in 2022. Similarly, Onboard (once known as Passageways) announced a $100 million mega round from JMI in July 2021, and then a subsequent acquisition in August of the same year.
Formstack, a Fishers-based B2B SaaS company, has always been a product-led growth trendsetter in the Indiana tech ecosystem. A great deal of the company’s employees worked remotely years before the pandemic. In June 2014, they received an undisclosed investment. Fewer than five years later, the company completed three acquisitions. Formstack went on to raise $425 million in November 2021; it was the largest raise ever recorded by an Indiana tech company.
It’s important to point out that this kind of activity is not exclusive to tech product companies. In April 2019, Resultant, a tech services company previously known as KSM Consulting, was acquired by Renovus Capital, a private equity firm in Philadelphia. From June 2019 to February 2021 Resultant went on to acquire three companies and then had its majority ownership sold to another investor based in New York City. They announced their most recent acquisition in May. Cybersecurity services company Pondurance took on a large investment from Newlight Partners in October 2020 and followed up with the acquisition of Bearing Cybersecurity of Rockwall, TX in June 2021.
Are capital-backed, high growth tech product and tech services companies like Formstack, Greenlight Guru, Resultant, Pondurance and others poised to make additional acquisitions? We will have to wait and see.
National and international interest in Indiana tech companies
During this same three-year+ period, we have also seen outside interest from nationally or even internationally recognized companies that have made acquisitions in Indiana. In July 2019 Ford Motor Company acquired DoubleMap. SAP purchased Emarsys in October 2020 and Socio was acquired by Cisco in May 2021. Kenzie Academy, a coding school based in Indianapolis, took on $100 million of debt financing in 2019 to finance students in technology training. Two years later the academy was acquired by Southern New Hampshire University. Finally, Microsoft acquired ClearSoftware in 2021.
Acquisition strategies have also led major scale-up companies to move their offices or open significant satellite offices in Indiana. We saw the biggest example of this when Exact Target was acquired by Salesforce in 2013 for $2.5 billion. Instead of taking the technology and people back to the Bay Area, Salesforce made Indianapolis its headquarters for the company’s Marketing Cloud division.
Recently, we saw similar activity with Jobvite and Terminus. In 2019, Jobvite, a Bay Area HR tech company, was part of a $200 million investment from K1 Investment Management of Los Angeles. The investment also included the acquisitions of HR tech companies Talemetry (Richmond, Ontario) and RolePoint (Bay Area) along with Canvas of Indianapolis. Aman Brar, founder of Canvas, would go on to become the CEO of Jobvite until June of 2021 and the company moved its headquarters to Indianapolis. Atlanta-based Terminus acquired Sigstr, a High Alpha company, in December of 2019. That same month the company appointed Tim Kopp as CEO. Kopp, who served as Chief Marketing Officer with Exact Target from 2008 to 2014, would lead the company from downtown Indianapolis. In 2020, the company acquired GrowFlare of San Diego. The following year, they raised $90 million in Series C funding and then went on to open a London office and made an additional acquisition in September.
Homegrown investors have done well
The last trend to point out is the success of Indiana-based venture capital funds. Most of the firms rooted in Indiana can claim at least one exit since 2019. Elevate Ventures, thanks to its large portfolio makeup, can boast of at least 17 tech companies that have been acquired by other companies or investors. In addition to economic impact, such exits also generate financial returns to be reinvested back into the tech ecosystem in Indiana. Such reinvestments can take the form of future angel investing in companies or more limited partner investment into local venture funds. In Elevate’s case, it’s serving an evergreen investment model because of its strong partnership with the Indiana Economic Development Corporation.
High Alpha’s unique approach has also greatly benefited their investors and had a positive impact on the state of Indiana. The firm is known as a pioneer in the investment community with the creation of High Alpha Venture Studios. To date, the three funds created by this organization have founded and launched more than 30 companies, many of which are based in Indiana. Since 2019 at least six of the companies have been acquired. In addition to Sigstr’s roll-up into Terminus, which now claims Indianapolis as one of its headquarters locations, Pattern89 and Lessonly have also been acquired by well-known technology companies, Shutterstock and Seismic respectively, that have planted a flag in Indiana.