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The sale of Coleman Consulting Group to Blue Pumpkin Software illustrates T.V. Metz & Co.'s creative approach to technology M&A in the $3 million to $35 million space. Our disciplined search combined with creatively identifying tangential buyers resulted in a successful, yet unconventional acquisition.The fit was not obvious. The companies operated in different markets and had very different products and services. 

 The Situation

Coleman Consulting Group, Inc. helps its clients improve operational performance by optimizing personnel and capital equipment. Clients include large manufacturing and mining companies that require a significant number of shift workers. Coleman has helped firms like Kaiser Aluminum, General Motors, Allied Signal and EDS optimize the deployment of capital and human resources throughout their organizations. 

Coleman's team of 35 consultants rearrange work schedules and reduce schedule overlap, resulting in  more efficient operations. Savings also result from avoiding the cost of purchasing new capital equipment. 

The company flourished, revenue exceeded $10 million and the firm was extremely profitable. To capitalize on this success, Coleman brought in a venture capital firm that acquired half of the company at an attractive valuation for the founder. The plan was to step on the gas, enter more markets and take the company public. 

A new president was hired who pushed the company to aggressively enter two additional niches in six new geographic markets. The firm did not have the infrastructure to support such aggressive expansion. After a year of futile effort and rising sales expenses, the company had achieved only minimal success in entering additional markets. 

In addition, sales tapered off. The founder had been the primary company evangelist and salesman. Under the new regime, the company's consultants now had the task of making sales in addition to their ongoing consulting work. The sales effort became unfocused, employees became discouraged and the company experienced its first loss. 

Rather than continue the push into new markets, the company needed to change course. The venture capital backers had lost enthusiasm for the company's mission, the president was terminated and the founder returned to run the company. After considerable discussion, it became clear that the most attractive option was to team up with a strategic acquirer, i.e., sell the company. 

The Response 

T.V. Metz & Co., LLC was engaged to explore strategic alternatives, find a potential buyer and close a transaction. Our team researched the market space, drafted a descriptive memorandum and began contacting potential buyers. 

Coleman's key asset was its intellectual property – its knowledge base of best practices and optimization methodologies (from 15 years of experience) and its people. We sought buyers who could effectively utilize the company's key assets.

The first step was to contact the usual suspects in the consulting space -- the top 50 consulting firms and consulting divisions of the major accounting firms. We also contacted the consulting divisions of companies such as IBM and UPS, as well as large software firms looking to expand into consulting (Baan, SAP, and Siemens). 

We contacted specialty consulting firms: operations consulting, health care consulting, manufacturing consulting and information technology consulting. The categories became narrower as we dug deeper – workforce management consulting, scheduling consultants, logistics consulting, etc. Coleman was not an obvious fit for any buyer. It did not fit the "normal" consulting company strategy. 

Another question arose: should the company remain as a standalone entity or should it be integrated with an acquirer? Integrating meant the fit had to be fairly tight. As a standalone division, the fit did not have to be as tight; Coleman could stand as a profitable division on its own. 

We examined several information technology consulting areas as well as lean manufacturing. We investigated various fringe sectors of the software space – enterprise management, time & attendance, scheduling, human resources and labor tracking software. A number of software companies were adding services and consulting to their software businesses. 

The Solution 

Coleman had been gradually repositioning itself as a scheduling company. The firm had done scheduling for call centers, distribution centers, retail, and manufacturing companies. Scheduling is a critical task for a number of industries (airlines, railroads, hospitals, call centers) and the area appeared promising. 

We contacted firms in the call center space, one of which was Blue Pumpkin Software, Inc. of Mountain View, CA. Blue Pumpkin is a leader in work force management software and its PrimeTime family of products provides robust forecasting and management software for call centers.  

Coleman's consultants could install the workforce solutions that Blue Pumpkin sold and provide value-added services to its high-end installations. Blue Pumpkin could add a strategic service component to its business. Coleman's "best practices” scheduling technology could improve software performance and customer satisfaction. Coleman also had a client base that gave Blue Pumpkin cross sale opportunities. 

In Review 

The unique aspect of this transaction was that the fit was not obvious. The companies operated in only slightly overlapping markets, with different products and services – one was a software company; the other was a consulting company. 

In arranging this transaction, we contacted 159 companies, many of them were very remote fits. It is fairly straightforward to close a transaction with a buyer in the same market space. However, in this case we reached out to the tangential and fringe buyers in adjacent markets who were not the obvious fits. This approach requires significant effort, however, it does produce results. 

The sale price of $9 million was greater than the shareholders expected and they were pleased to realize this value.

This transaction is a good example of disciplined execution coupled with resourceful forays into tangential markets. Like any business, success lies in the execution. In this case we executed our search process in a disciplined and systematic manner. We moved forward aggressively in the core market but we also investigated adjacent market sectors. In the end, we successfully closed an unusual and creative transaction.