BroadSource enters acquisition mode with $14.8M deal
01/07/2011
Atlanta, GA (Atlanta Business Chronicle) -- An Atlanta-based software company backed by serial entrepreneur Tripp Rackley has done a $14.8 million deal that will quadruple its workforce — and marks the beginning of a series of potential acquisitions.
The company is BroadSource Inc., whose expense management software helps businesses reduce and control their telecommunications spending by monitoring and managing services and contracts.
As part of the deal, BroadSource merged with Integrated Mobile Inc., a Columbus, Ohio-based company that provides managed mobility services. The combined company, which employs more than 100 and has annual revenues of more than $10 million, is headquartered in Atlanta.
The deal will help BroadSource grab a larger share of the fast-growing wireless business and is the first of several possible acquisitions aimed at growing the product portfolio and customer base, said Michael Lustig, CEO of the combined entity.
BroadSource’s subscription-based service helps businesses identify the most suitable telecommunications services, and negotiates the best deal. BroadSource’s software then monitors and manages the client’s telecom spending and contracts. In return, BroadSource collects monthly and annual fees.
Longer term, BroadSource wants to diversify into other fast-growing variable expenses, such as energy, information technology and transportation.
“Those are a couple of interesting areas that have a lot of complementary products and services that we can consolidate into our technology platform,” Lustig said.
Cutting the cord
BroadSource targets an important and growing need; as technology evolves, so does its use by Corporate America, said Rackley, who initially invested in BroadSource in 2003 and is its chairman.
“I liked the idea ... just knowing the complexities that all businesses have around any kind of variable expense management,” said Rackley, who founded mobile technology firm Firethorn, which was acquired by Qualcomm Inc. in 2007 for $210 million in cash.
BroadSource’s investors include Atlanta-based Noro-Moseley Partners and Birmingham, Ala.-based Harbert Venture Partners.
BroadSource sees significant growth in the wireless business as mobile devices and now computer tablets proliferate in the boardroom, said Alan Powell, the company’s senior vice president of sales.
During the past five years, businesses have seen their wireless costs increase 20 percent to 35 percent, Powell said, citing Gartner data. Enterprises will have more mobile phones than desktop phones in 2011, according to Gartner.
BroadSource targets midsized businesses — those with more than $1 million in annual telecommunications spend — who lack the capital, staff or expertise to manage their telecom spending in-house.
BroadSource’s software and service can reduce a company’s telecom spending by up to 30 percent, Powell said.
“It usually pays for itself in the first 12 months,” he said.
Growing need
Mobile telecom expenses are getting more complex, Noro-Moseley partner Alan Taetle said.
“Business needs a third party to keep bills honest, as well as make sure that businesses are getting the best prices they can,” Taetle said.
BroadSource is targeting a slice of the more than $10 billion global expense management market.
The wireless business is growing at a more than 25 percent annual clip as companies invest in cell phones and tablet computers to keep their increasingly mobile workforce connected and productive, Lustig said.
“Wireless is really the growth vehicle of the future,” he said, noting companies want their employees accessible and able to make decisions at a moment’s notice.
That need for instant connectivity, Lustig said, “is going to get more and more intense because competition will drive it.”
The Integrated Mobile deal helps BroadSource grab a larger share of the wireless expense management business.
Integrated Mobile, a portfolio company of New York-based Enhanced Equity Fund L.P., offers products and services geared toward wireless expense management.
The Integrated Mobile transaction delivers scale or volume — a competitive necessity in the expense management business.
“To compete in this big arena with bigger companies, you’re going to have to have critical mass [and] a global reach,” Lustig said. “The only way to do that is to bring companies together.”
Future acquisition targets will offer complementary products and services and a global reach. Integrated Mobile expands BroadSource into Canada and plans call for expansions into Mexico and later Europe.
The BroadSource-Integrated Mobile deal will help reduce costs and allow each company to cross-sell to the other’s client base.
The combined company faces challenges — including integrating corporate cultures, people and operations, Taetle said.
The new company must also grow its core business, he said, while making inroads into new spend management categories.
©2003 - 2010 Noro-Moseley Partners. All Rights Reserved.