B2B. Procurement Leaders (PL), the integrated B2B group serving the global community of corporate purchasing bosses, has been sold to the private equity-owned World 50 Inc., a peer-to-peer network which claims more than 900 members from 500 companies worldwide. The Atlanta-based company operates communities of CEOs and other executive functions.
This looks like a smart combination of two companies which provide knowledge-sharing and a sense of community to worldwide members.
Although the price has not been disclosed, it is believed World 50 (which, like PL, was launched in 2004) has paid some £30-40m for the London-based company which will continue to be managed by Nandini Basuthakur who became CEO in 2017.
It was founded by Alex Martinez, Mark Perera and Richard Pope as “a global membership network serving major corporations and procurement, sourcing and supply chain executives.” It provides independent intelligence, professional development and peer-to-peer networking through online, events, publishing and training. It has an international client base of some 750 leading companies with 33,000 members.
PL employs some 120 people (50% in membership functions) spread across offices in the UK, US, Australia, and India – and had revenue of £12.3m in 2017. It exploits the rising importance of procurement in international companies which now realise that these functions can be the key to strategic supplier relationships, production security, reputation, and risk management.
The company was formed to create a global community from the purchasing executives who were were often the unsung heroes of companies, seen as the difficult people who pared down budgets and struck fear into the hearts of visiting sales people. But all their hard work found its way straight to the bottom line.
The founders (none of whom had previous experience either in media or purchasing) set out to extract and centralise the knowledge from among the best minds in procurement and share the insights with a wider group via the whole range of platforms. They quickly discovered how readily even highly-competitive companies would share information in order to get something valuable (other people’s data) in return. The strength of Procurement Leaders, 60% of whose revenue is membership subscriptions (39% is events), is its database – intellectual property provided (and constantly updated) by the membership itself.
One long-time member this week paid tribute to the company’s founders: “PL has had a major influence on procurement, bringing together firms to learn and network in a very positive manner, and sprinkling a bit of stardust on our sometimes rather dull procurement world! I hear some solution providers complain about the amount they’re charged for participation, but the fact is they pay up, which is down to the strength of the practitioner-side network PL has developed, with an unparalleled list of big corporates as members.”
But, for all its inventiveness and campaigning on behalf its members, PL’s financial performance has been erratic, with EBITDA bouncing around either side of £1m for the past four years and margins of 7-16%: hardly the stuff of a go-go digital business. Part of the explanation lies in the company’s rising costs. Opening offices around the world has been one drag on profit growth. But, during 2014-17, the 62% revenue growth was all but swallowed up by a similar increase in headcount. Then there’s the familiar erratic performance in conference-awards event revenues, especially from sponsorship. But the real story has been the relatively high subscription churn rate as the company has had to run fast to stand still.
A sign of the expansion potential, after years of bumpy financials, is the geographical profile of revenues which – in 2017 – were 37% from the UK, 28% each from the US and Europe/Middle East/Africa, and 7% from AsiaPacific. The US and AsiaPacific were the fastest growing.
While total revenue was up by 8% to £12.3m, adjusted EBITDA actually dropped by 18% to £938k. But this reflected a strategy to increase membership revenues by adopting corporate enterprise licenses instead of a seat-based license model. This has resulted in 35% growth in the average value of annual membership contracts. This almost certainly produced strong profit growth in 2018.
There will have been times when the founders of Procurement Leaders might have expected a higher price for their company. In 2015, when PL achieved EBITDA of £1.5 on revenue of £9.5m (at peak 16% margins and with cash deposits of £3.4m), they might have expected profits of £4m by now, rather than struggling to reach £2m. But the appointment of an independent CEO almost two years ago, with the founders stepping back from their executive roles, was inspired.
Nandini Basuthakur has revitalised and re-engineered the company. That and a relatively long courtship/ negotiation with the uniquely suitable World 50 buyer helped the PL founders to get a good price after all for their built-to-last business. A great result all round.