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Aderant changes hands

The following announcement was made by Aderant at 12 noon New York time/5:00pm London time. Plus note The Orange Rag's own comments that follow…

Vista Equity Partners today announced that it has completed the acquisition of Aderant Holdings Inc. Vista, a private equity firm with over $2 billion in committed capital, invests in private and public software and technology-enabled companies, focusing on successful organizations committed to maintaining industry leadership.

“We are very pleased about our partnership with Vista Equity Partners, especially because we share a common focus on delivering long-term value,” said Michael Kohlsdorf, President & CEO for Aderant. “I am fully confident that Vista will help us further energize our business, and I look forward to working with our current management team and dedicated employees to reach the next level of our company’s growth. In that context, we remain focused on developing world-class products and providing unrivaled customer service and support.”

Vista focuses on vertically specialized companies that develop and market software, software-as-a-service, and technology-enabled business services. Acquiring Aderant is consistent with Vista’s strategy of partnering with exceptional executives in technology-oriented businesses.  Vista chose to acquire Aderant because of its strong market position, product offerings, loyal and satisfied customers, and its highly-talented and devoted employees. Leveraging its experience with numerous other vertically oriented software and technology-enabled companies, Vista is uniquely qualified to help position Aderant for continued growth and will enable the company to strengthen and expand its position in its respective markets.

Vista Founder and Managing Principal Robert F. Smith said “We are long-term investors in technology companies that are committed to market leadership. We are tremendously excited about working with Aderant. We look forward to working with the management team to both continue serving the needs of their current customers as well as building on their platform to offer additional solutions to existing and new customers. The company has an impressive list of global clients and a shared vision to be a best-in-class provider of software products and services. The management team, led by Mike Kohlsdorf, has done a tremendous job transforming and growing a great company over the last few years.”

Harris Williams & Company acted as financial advisor to Aderant.  Financial details of the transaction were not disclosed.

Comment…

• We understand that not only have the entire existing executive team at Aderant been retained (including Mike Kohlsdorf) but also that many have them have taken the opportunity to invest their own money in the company.

• The Vista Equity deal also ends rumours (admittedly spread by some competitors) that the previous owners – another private equity group Francisco Partners – were poised to sell Aderant to LexisNexis. Instead, Aderant remains a privately held, independent vendor. Apart from removing any uncertainty, this also ensures there will be no disruption to services and customer-facing operations, which would have inevitably followed had Aderant become part of a larger existing legal market vendor.

17 replies on “Aderant changes hands”

No mention of what they paid for it. It would be interesting to know the value and how it was funded. Most PE houses like to use a great deal of debt but that may not be easy to come by at the moment.

Regardless of the details of the deal itself, one of the good things about the way that this has happened is that senior executives at ADERANT have been personally contacting both clients (most importantly) and partner organisatons on a global basis to let them know about the change as soon as they were able to.
I agree with Charles in that it's also good the see the ADERANT executive team remaining on board and that ADERANT remains a privately held, independent vendor and that operations and technical direction will continue without dispruption.

Just when they were gaining ground on their competitors, they sell to another VC 'type' company. I bet the majority of the senior management with options are ready to bale out and you can imagine the client base thinking “here we go again”.

As an Aderant client I am so disappointed, as once again the promises made at the last User conference have proved empty, and it is the client base who will no doubt suffer in the long run.
I had hoped that rumours of a buy out were just competitors stirring it up, or if they were true it would be sold to a company with substance and a grasp of the legal industry, but this news leaves me feeling angry and let down.

and if they are sold on to yet another VC company in 6 months to a year…? I doubt they will hang around for long, and it must be a worry for the clients with this sort of upheaval.

I can't comment on what was said at the last User Group, but surely the business world – or rather the financial markets which are of course the very foundation – have turned absolutely upside down in the last few months. Any company that was held to something it may have thought or planned or said a few months ago would be guilty of not responding to dramatically changing times.
But for me it's sounds like a case of “the more things change, the more they stay the same”. Sure – there is a different name in the parent company box, but it's still an investment company, and the exec line-up and strategy presumably remains the same.
I agree with Charles – this is probably the better outcome for customers. Acquisition by a corporation – Lexis Nexis or any other – would be much more disruptive.

Well, I can vouch for what was promised at the conference, and I seem to remember the words “stability” and “investment” being bandied about. This news does not fill me with the same confidence and I for one would be happier with a more established owner, after all, what guarantees are there that Vista won't make wholesale changes (development budget cuts, more resource cuts etc) in preparation to sell for a quick profit ?

This company will continue to be an investment football, making money for the few in charge at any point in time and their PE investors. It is probably more about that than any grand product vision or love of independance. One assumes that the previous owner had squeezed as much money out as possible, or saw harder times ahead – now its on to the next VC to see how much they can make. A larger non-investment entity offering a broader vision would have been a better home and probably with more longevity. It would be less cringeful to watch all this if we were spared the hollow platitudes and thin reasoning from their executives – we are all pretty well versed in the art of PE investment strategies these days and can see through the wool. Fortunately for them, the products seem to be ok and the base is fairly loyal so no doubt they will make some money from it.

As frustrating as acquisitions are for clients, you should take advantage of the situation. The last thing Aderant/Vista (or any supplier in this situation) will want to do is upset or lose any existing clients, so use this announcement as an opportunity to get some reassurance. Request a meeting with the most senior members of the organisation and get them to come and explain what the benefits and risks of this change will be for you the client. Ask for reassurance that this will not hinder the current service you are receiving (or if the service you are currently receiving is cr*p then ask for what improvements will be made) if they are a reputable supplier, then they will bend over backwards to keep you happy and make the commitments you require for a stable & mutually beneficial partnership!

It really doesn't matter which VC owns Aderant. They are a profitable, stable company and any owner/investor will look to play the long game in today's market. Their due diligence will have revealed the length of time a client has a PMS system and the VC will look to get their stake back though an IPO or trade sale when the market is right and Aderant have more momentum. If anything, customer experience is usually BETTER with smaller, privately-owned companies that go the extra mile for their customers, than with larger, less nimble organisations.

So there were rumours that “the previous owners – another private equity group Francisco Partners – were poised to sell Aderant to LexisNexis”. This seems very plausible to me. LexisNexis' main competitor in the wider legal market is Thomson (sorry, I mean “Thomson Reuters”). Thomson have Elite. LexisNexis have, er, AXXIA. Competitve at the top of the legal market? I don't think so. Taking this “rumour” further, perhaps it is real evidence that LexisNexis have finally woken up to what it really means to have AXXIA and Visulafiles in the same stable.

As a law firm manager looking at starting up our PMS review process next year, I can't disagree more with this statement. As noted, this is a long term investment. If Aderant are changing hands every few years, or being used as an 'investment vehicle' (yes I read the off-legal posts on the new owner) I can't see how this will provide me with the security and comfort I need to make/recommend such a long term decision. All the marketing rhetoric means nothing, there is simply an enormous amount of inherent risk here. Larger organisations are less nimble that's true, but they also have the stability and security that a large corporation provides, and that's much easier to sell to my partners. Has this anonymous poster ever had to present to a board of partners and talk to them about 'risk'? One would imagine not given this opinion.

This is interesting – it seems likely that someone Anonymous with a vested interest in Aderant is having a pop at Lexisnexis – as this thread was about Aderant perhaps someone is showing some insecutity? As we're on the subject of Lexisnexis, both Axxia and Visualfiles were working on major developments and as far as anyone outside of Lexisnexis knows, maybe they still are but with a common interest now. Don't write them off – they have a huge number of UK clients, presumably big-company r&d budgets and are a much more significant player than Aderant are in the UK. My guess is we'll be hearing alot more about them next year.

“… what it really means to have AXXIA and Visulafiles in the same stable …”
Given the many previous posts about Visualfiles and the number of people leaving, this brings to mind the proverb about shutting the stable door after the horse has bolted.

“… Has this anonymous poster …”
A bit rich since this poster too was anonymous. (As am I before anyone comments)

Aderant was and is owned by a VC. Yes there is some risk in that, but there is also risk in that a larger organisation may decide to spin-off a division or reduce investment in its products. There is also risk in that a smaller, privately-owned PMS vendor could go under. In the present market, all options carry a degree of risk, especially over the 10-15 year lifespan of a PMS system – as noted. If Vista paid c$111M for Aderant, they need to work towards a return and that can only be achieved by efforts to grow the company. If/when it is sold on, all the assets of the company, including its maintenance base and its liabilities go with it – they don't just disappear. There is no 'large amount of inherent risk', just a normal level of business risk that exists for all potential purchasers of large, high-dependency systems with a long lifespan. Risk-averse partners may well see this as risky, but that does not mean that it is.

“a vested interest in Aderant”? Not at all! Just an independent thinker watching this farce from afar. LexisNexis is a publisher with a publisher's mentality. Bringing in “business leaders” to key managerial roles will only make this worse not better as they expend energy fighting the status quo inside the company rather than reacting to the market outside. Given the importance of good case management and PMS systems to the smooth running and profitability of law firms, isn't asking LexisNexis to do this for you a bit like asking your librarian to run your business?

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