Friday, July 31, 2015

Bain: $150M for SevOne; $3B IPO by 2016?

Says software firm boss Mike Phelan

Bain: $150M for SevOne; $3B IPO by 2016?


Bain Capital, Boston, has led a new $150 million investment into SevOne, a firm based in suburban Wilmington, Del., whose SevOne Cluster licensed software helps Comcast, Credit Suisse, Lockheed Martin, Russia's Sberbank, Verizon, smartphone makers, and other big companies find information-technology network problems so they can fix them before systems fail. Statement here.

SevOne revenues, $30 million a year, and employment, now 141, have doubled annually for the last four years and are on track to do so again, ceo Michael Phelan, a Daylesford native, told me. 

"The company is profitable and growing, so we had the option of picking [our lead investor], and we picked Bain," which has experience backing "hyper growth companies and building them to scale," he added. Phelan expects Bain will help SevOne expand its client list beyond giant companies to add middle-market firms. "
The goal is to have this as a public company in the next two to three years."

Phelan says much of the new cash will pay back 2007 investments totalling $3.5 million by Osage Ventures of Philadelphia, past Sungard Data Systems chairman John Ryan, and other early backers. Bain invested "well over $100 million," while an affiliate of Osage and other minority investors accounted for the rest. Outside investors now own about half the firm. Osage and other early investors had earlier owned about one-third.

"We were attracted by the incredibly high satisfaction levels of SevOne’s customers, the unique differentiation of their technology, and the talented management team. We look forward to partnering with the SevOne team to maintain their growth and accelerate their go to market operations,” said Bain managing director Ben Holzman in announcing the deal.

SevOne has attracted "the world's largest, most sophisticated customers" to its "fast time-to-value and unique peer-to-peer architecture that scales" as their Big Data networks grow, added Bain m.d. Ben Nye.

Phelan told me SevOne is making so much money it doesn't need Bain's investment to grow. He also says he's received purchase offers from companies he won't identify, which he's had to bring to the board for consideration.

But now, taking on Bain money helps insure the firm's independence during its rapid growth stage leading up to an IPO or eventual sale to "IBM or whomever": "This is like a poison pill. Bain is aligned with our vision to build it big. It makes employees a lot more comfortable. We're going to build a big company." He projected "a market value of $3 billion in three years." Pacific Crest Securities advised SevOne on the deal.

Phelan credited Osage partners Nathanael Lentz and Robert S. Adelson for sticking with SevOne until it attracted big out-of-town capital. As part of the Bain deal, Phelan will replace Addleson as SevOne's chairman. "We can't spend everything they've left with the company," even after paying off early investors at "a huge multiple" of their initial investment, Phelan told me. "I'm having a lot of fun." 

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PhillyDeals posts drafts, transcripts and updates of Joseph N. DiStefano's columns and stories about Philly-area business, which he's been writing since 1989.

DiStefano studied economics, history and a little engineering at Penn and taught writing at St. Joseph's. He has written thousands of columns and articles for the Inquirer, Bloomberg and other media, wrote the book Comcasted, and raised six children with his wife, who is a saint.

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