Summary

Cartesis is being acquired by a private equity group led by Apax Partners Funds. Ventana Research believes the move is a positive step for the company. It eliminates the ownership question that had been hanging over the firm since it became clear that its previous owner, PriceWaterhouseCoopers (PWC), would have to sell it because of new rules governing auditing firms. We advise our clients who thought Cartesis products were a good fit, but were put off by the ownership issue, that they look at it again. We recommend global 2000 companies looking for a powerful and highly scalable statutory consolidation should consider Cartesis Magnitude.

Assessment

Cartesis, a financial management software vendor formed in 1990, is being acquired by a private equity group lead by Apax, a multinational firm, for an undisclosed amount. (The other participating groups are Advent Venture Partners, CDP Capital Technology Ventures and Partech International.) Cartesis had revenues of €77 million ($95 million) in latest fiscal year ending June 2003 and has 640 employees in 8 locations worldwide. The company has over 1,300 customers, including many of the largest European and multinational firms. Until now, Cartesis had been owned by PWC, which purchased it in 1999. The sale was triggered by the change in rules governing auditing companies that essentially forced PWC to divest.

Ventana Research believes the move is a positive one for Cartesis since it eliminates whatever uncertainty had existed under its previous ownership by PWC. Apax, while not a household name, is a longstanding investor in technology and has ownership positions in numerous software companies. In other words, Cartesis is in strong hands. Cartesis recently announced new heads of North American sales and professional services. In the wake of the transaction, we expect Cartesis will move to increase its market profile with additional marketing and an increase in its direct sales presence in the North American market.

Cartesis Magnitude is a Web-based solution for consolidation, reporting, forecasting, and performance measurement. It integrates data from multiple ERP/accounting systems into a single application for financial analysis, planning and reporting. Its capabilities are well matched to Global 2000 organizations, particularly those with any complexity in their business model (e.g., multinational operations, distribution channels, ownership structures, etc.). Magnitude iAnalysis enables individuals to perform in-depth analysis of business and financial data on the Web, enabling any authorized user to, for example, quickly identify variances and exceptions. The company will be introducing a budgeting application shortly that we expect will address the business and IT requirements of global organizations.

On balance, we think being owned by a private equity group (rather than being public or part of a public company) will work in Cartesis's favor. Although the company and its consolidation software packages have been around for a while, the company is in a build mode. It will be adding a budgeting application shortly and increasing its marketing presence in North America. Private companies do not have the distractions that can come with watching their share price or being concerned about making the numbers for the quarter.

Market Impact

The change in ownership is likely to have at least a modestly positive impact on Cartesis's marketing and sales efforts in North America for two reasons. First, the elimination of the uncertainty eliminates a piece of "FUD" that might have prevented sales in the past. More to the point, since the intention of any private equity investor would be to increase sales (and profits) as quickly as possible, we think it is likely that Cartesis will increase its sales and marketing profile in the North America market. We think its push in North America will pose heightened competition for Hyperion and LongView Solutions, both of which also target the high end of the market with Hyperion Enterprise and LongView Khalix products.

Recommendation

Cartesis Magnitude should be on the evaluation list of any Global 2000 company that is in the market for statutory consolidation/financial management software as it has removed the ownership issue. Its ability to scale and handle complex corporate structures makes it particularly useful for larger firms, particularly those with multinational operations. Finance executives (particularly in larger companies) should be aware of- and assess all of their options in this important software category.