Market Move – Vector Capital takes Saba Software Private

Today we learned that Saba Software (Saba) is being taken private by San Francisco headquartered Vector Capital (Vector). The deal is valued at 400M US$ (see here) - setting the Saba stock price at 9 US$, pretty close to where it was trading over the counter (SABA was de-listed in 2013).

REDWOOD SHORES, CA and SAN FRANCISCO, CA. – February 10, 2015 –Saba (OTC Pink: SABA), a global leader in cloud-based intelligent talent management solutions, today announced that it has entered into a definitive agreement with affiliates of Vector Capital (“Vector”) under which an affiliate of Vector will acquire all of the outstanding shares of Saba common stock for $9.00 per share in an all cash offer.

MyPOV – Nice way to stick in the new software category that Saba is trying to shape – ‘intelligent talent management’, with a lot of use of analytics. A good positioning and we took a first look at the new Compensation Management product back at HR Tech in Amsterdam in fall of 2014.

“Over the course of Saba’s comprehensive review, the Board of Directors and our advisors evaluated a wide range of strategic alternatives, and engaged with a number of parties. We are pleased to have reached this agreement with Vector, which provides significant cash value for our shareholders. Our Board unanimously believes that this is the best outcome for Saba, our shareholders, customers, partners and employees,” said Bill Russell, Saba’s Non-Executive Chairman.

MyPOV – Let’s hope this is the best outcome for Saba, which has been trouble for (too) long by not being able to release earning statements. Vector actually helped Saba with a credit line in the past (see here), so this acquisition may be a consequence of that credit action. If a good or bad next move – only time will tell and we may never know. Vector has a good track record getting troubled vendors back on track, I remember once famously hyped Niku (ultimately sold to CA) as a good example.

“Over the last 17 years, Saba has delivered a growing set of innovative intelligent talent management solutions, which are in use today by more than 2,200 global market leaders and innovators,” said Shawn Farshchi, President and CEO of Saba. “Vector has been a great partner to Saba since 2013. We are thrilled to continue the relationship, and take advantage of the support and resources of Vector and their partner network to strategically invest in expanding our product portfolio, further our customer success programs, and continue to the next stage of the company’s growth and market leadership.”

MyPOV – The way how Farshchi puts it, it looks like Vector might invest more into Saba. And that investment is certainly needed, as the vendor is building a new product suite and needs to compete with both Talent Management and overall HCM suite vendors with deep pockets.

“Vector, along with some of the world’s premiere financial institutions and investors, are excited to help Saba move beyond its financial restatement process and put the focus squarely on the Company’s innovative cloud talent management platform and its blue chip customer base,” said David Fishman, Managing Director and Head of the Private Equity Team at Vector Capital.

Andy Fishman, Managing Director at Vector Capital, said, “We are excited to partner with the management team and the dedicated and talented group of employees at Saba. We look forward to them becoming part of the Vector family.”

MyPOV – Interesting to find two quotes from Vector in the press release. Goldman Sachs veteran David Fishman is certainly the ‘software guy’ at Vector – with exposure to almost all its software related portfolio. Maybe both Vector divisions – Private Equity and Vector Capital help to fund the deal. Or Vector Capital gave Saba the credit, and now it is Private Equity to step up. Though the credit was relatively small (25M US$) compared to the current transaction value.

The transaction is subject to customary closing conditions and the approval of Saba shareholders, and is expected to close in the coming months. The transaction is not subject to any financing conditions. Saba senior management is expected to remain in Redwood Shores. [...]

MyPOV – Good to add that the senior management will stay in the campus in Redwood Shores – which promises personnel stability.

Implications, Implications

So let’s look at the implications of this transaction for the constituents.

Implications for Saba Customers

The hope would be that this transaction ends concerns about the viability of Saba. It will be back to Vector and Saba to make sure that roadmaps and viability from a corporate and financial perspective are given and communicated. Customers should actively reach out to Saba to get re-assurances on both roadmap items, global build-out and continuing operations. Saba and Vector should expect these inquiries and be ready to address them, ideally even proactively.

Assuming this will all pass well, this transaction is good news for Saba customers. Saba was previously cut out from raising capital, it now has the privacy of private equity to restructure, get books in order and grow product and global presence.

In the long run customers should not forget that Vector is a private equity firm and will not hold Saba ‘forever’ – so looking at the customary exit for PE firms in 5 or 7 years of holding Saba will be an important aspect for future contract negotiations.

Implications for Saba

We can only hope that this will put the vendor on solid footing, good investment and return to the strength and good reputation that Saba once had in the Learning and Talent Management space. As we wrote earlier, Learning is not winning the Talent Management Wars or the HCM Wars – so it is key for Saba to actively expand its portfolio. Like all Talent Management vendors it will need to decide if it needs to create a HR Core system – or not. The new (true) analytic (more here) angle of the latest product version is promising, but needs customer traction and adoption.

Implications for Saba Competitors

It looks like nobody wanted to buy Saba. Its strong Learning would have been a fit for Workday, could have complemented both Oracle and SAP. Would have helped Infor. Maybe ADP. Added a lot of customers for Ceridian and Ultimate, but probably was too expensive for them. If Saba ever explored this and why it did not happen - we will probably never know. Assuming Vector will invest into Saba, they (and the Talent Management vendors like Cornerstone, Lumesse, Skillsoft SumTotal, TechnoMedia etc. will see a more formidable competitor. The targeting of Saba customers may come to an end soon.

MyPOV

I hope this turns a less fit vendor into a good market participant and competitor. Talent Management has for a long time overpromised and under delivered. It is time for Round 2 – using the next generation capabilities of (true) analytics, BigData and cloud. That analytics matter for talent management, starting in recruiting is widely accepted not only by the traditional vendors but a bustling startup scene. Looking forward to have one stronger vendor in the market – good luck to Saba customers, employees and the vendor overall. Good to see the Saba story has not ended (yet).

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