Sale of MSP Unit Puts Private Equity-backed IQNavigator on M&A Offensive

IQNavigator Inc. remains an attractive takeover candidate in the vendor management system universe, but the private equity-backed company is on the M&A offensive following the recent sale of its managed services provider arm.

“The whole company [IQNavigator] gets constant interest all the time, but it’s focused on being a buyer right now,” said Phil Colaco, managing director at Deloitte Corporate Finance LLC, which advised IQNavigator on the sale of its MSP arm to Warren, Mich.-based MSX International Inc. for an undisclosed price on Aug. 4.

Centennial, Colo.-based IQNavigator, a workforce management provider that is owned by Chicago PE firm GTCR Golder Rauner LLC, hired a Deloitte team that included Colaco, James Miller, Will Cimino and Jay Stafford several months ago specifically to shop the MSP division after the company deemed it non-core. (IQNavigator is predominately a software and technology provider, whereas the MSP business is a service-oriented).

In the aftermath of SAP AG’s March 26 acquisition of industry leader Fieldglass Inc., observers believed more suitors would surface in the space, especially when it came to IQNavigator, which represents the second-largest cloud-based VMS player that manages temporary labor after Fieldglass.

The third-largest is Jacksonville, Fla.-based Beeline, a unit of Swiss human resources and recruitment company Adecco Group. After that, the VMS space is occupied by significantly smaller entities.

Colaco said the MSP sale process was among the most competitive he had ever run, noting that primarily strategics, along with a few PE groups, were in the mix.

“MSP is a very good, profitable business [IQNavigator] had for a long time,” Colaco said, while declining to provide any financial figures. “At the end of the day, they decided they wanted to be a tech company.”

GTCR managing partner Mark Anderson noted that IQNavigator’s MSP business conflicted with some important channel partners — some of whom had for some time expressed an interest in buying the unit.

While he didn’t identify specific suitors in the mix, Allegis Group Inc., Bartech Group, Geometric Results Inc., Kelly Services Inc., Randstad Holding nv, Tapfin, a division of ManpowerGroup Solutions Co., and Yoh Services LLC are among its MSP partners, according to the company’s website.

IQNavigator’s technology partners, meanwhile, include SAP; ViaWest Inc., which Shaw Communications Inc.acquired for $1.2 billion on Sept. 2; Workday Inc. ; and Oracle Corp. , the latter of which sources have previously identified as a likely suitor for IQNavigator in its entirety.

GTCR inherited its majority stake in IQNavigator when it injected more than $100 million into the company on June 9, 2008. The sellers at that time were IQNavigator’s venture capital investors — Baker Capital Corp., Hillman Co., Sequel Venture Partners, Raeder Venture Management and Public Employees’ Retirement Association of Colorado.

Acknowledging that IQNavigator regularly receives inbound interest, GTCR’s Anderson indicated that the company has more room to grow both organically and through M&A after bringing in a new management team a little over a year ago.

“Candidly, I don’t want to exit until the management team has had the chance to do some things that are possible,” Anderson said via phone.

IQNavigator appointed Joseph Juliano to replace Lou Andreozzi as CEO on July 2, 2013. Juliano previously served various executive roles at Ariba Inc., Telesis Software, FreeMarkets Inc. and Intelisys Inc.

The company announced the expansion of its executive management team on April 15, adding four members to help fuel international expansion, while at the same time improving the company’s engineering and professional services expertise.

As GTCR postpones an exit from its more than six-year-long investment, IQNavigator appears to have ample firepower to pursue its own M&A.

While the company isn’t targeting acquisitions of any particular size, Anderson noted that the firm has “capital remaining in that fund to do some pretty sizeable things if we want.”

IQNavigator’s most recent purchase came on Jan. 8, when it bought the VMS software assets of ProcureStaff Technologies Ltd., a division of Volt Information Sciences Inc. , for an undisclosed price.

Outside of Fieldglass and IQNavigator, dealflow in the broader workforce management space has been fluid as of late. It was only on Oct. 30 that Bahrain-based Investcorp SA and Mumtalakat Holding Co. announced the acquisition of Boca Raton, Fla.-based workforce management firm Pro Unlimited for an undisclosed sum.

“There continues to be a fair amount of strategic and financial interest in general,” Anderson said. “In a low-growth environment, there are very few industries like this that will continue to grow.”