Deal focus: Software Combined sees sense in aggregation

Brand agglomeration platforms are proliferating across Asia, leveraging a systemised approach to M&A that facilitates rapid identification of relevant targets and the implementation of readymade value creation initiatives. Inspired by how US-based Thrasio has achieved significant scale by acquiring Amazon vendors, their mantra is buy, integrate, repeat.

Australia’s Software Combined is taking a similar approach to the vertical market software (VMS) space. It sees minimal local competition, which CEO Evert den Hollander believes will enable the company to position itself as “the acquiror of choice” for mature software businesses.

Navis Capital Partners recently acquired a controlling stake in Software Combined for an undisclosed sum. The PE firm – currently deploying its eighth Asia fund, which closed on USD 900m last year – typically makes equity investments of USD 30m to USD 150m. Den Hollander and co-founders Niek Hoogenhout and Stefan Jansen have retained a significant minority interest.

Software Combined, which was established in 2020, has made four acquisitions to date: Scope Systems, Streamtime, Energy Inspection, and MacroView. The companies – specialists in mining, creative services, construction, and document management, respectively – are all based in either Australia or New Zealand.

With the support of Malaysia-headquartered and Asia-focused Navis, Software Combined plans to broaden its geographic scope. Markets of interest include Singapore, Hong Kong, and Malaysia as well as Europe, given the founders’ European heritage, den Hollander said.

Acquisition targets must meet strict criteria, including sticky customers in critical business application verticals, stable and recurring earnings, consistent and attractive margins, and high free cash-flow generation. Software Combined provides capital and strategic support to help them deliver on long-term growth objectives, offering capabilities that they wouldn’t be able to access independently.

“Many are likely to be founder-led businesses that have been operating successfully for several years but do not have succession planning or obvious exit options,” said Jansen, who serves as chief revenue officer. He added that these companies often lack natural acquirors, so Software Combined brings not only liquidity but also comfort that development will stay on intended trajectories.

With EBITDA in the AUD 1m-AUD 7m (USD 0.7m-USD 5m) range, target companies are generally too small to attract large strategic players or scale on their own. However, Jansen sees minimal downside risk for investors, citing product quality and loyal customer bases.

Navis has completed more than 80 control deals over the past 20 years, predominantly in Southeast Asia. Many of these were platform assets that served as launching pads for buy-and-build strategies. The private equity firm’s portfolio companies have made a further 80 follow-on acquisitions.

Johnny Zhang, an Australia-based partner at Navis, said that this investment ethos – which also prioritises optimising operations, maximising growth, and preserving the legacies of founders – is closely aligned with Software Combined.

He added that Navis targets companies with strong management teams and relies on their ability to execute based on their own reputations and networks in their sectors. Software Combined is “a strong case in point,” he said, pointing to the founders’ global experience across M&A, consulting, financial technology, software, and cloud operations.

Software Combined examines 150 opportunities every year, sourcing directly and through advisors. “Being constantly in M&A mode, we have a good angle on the viability of potential targets as well as on the deal process and structure, so we act quickly when we find the right deals and won’t be wasting advisors’ time," den Hollander said.

When it comes to its own future, however, Software Combined is willing to be patient. The company envisages reaching AUD 30m-AUD 50m in aggregate EBITDA by 2025, by which point an IPO might be feasible. But there is no rush. “Our mantra is ‘buy, optimize, and hold,’” Jansen added.

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• Topics
• Australasia
• Technology
• Buyouts
• Australia
• Navis Management
• enterprise software
• M&A