Plain Vanilla acquires Euphoria Software, vendor of telematics solutions and taximeters
YieldDD was enlisted to investigate scalability and growth.
"At first you think this is about a company that sells taximeters, how interesting could that be? But often the deeper you look into a company, the more fascinating it gets." Indeed, when Arthur Tjon, a partner at private equity firm Plain Vanilla, started to study Euphoria Software he came to like what he saw. As its name implies, his new investment target wasn't really about the hardware. "Their software is an essential piece of tooling for customers in the passenger transportation business, from taxi companies to operators of school and company vans. We saw a lot of growth potential, but we needed to know if their software solutions were scalable." Plain Vanilla enlisted YieldDD to investigate.
Assurance about the key asset
"As a matter of course we do financial, legal, tax and commercial due diligence on every target company we want to invest in", says Laurens den Herder, Investment Manager at Plain Vanilla.
But with Euphoria, it just made sense to also take an in-depth look at the software they had developed over the years. That's what makes the company unique and a big part of its value derives from that, so we wanted some assurance about the quality of their key asset before we invested."
Pragmatic, thorough and transparent
Plain Vanilla had some experience with conventional high-level IT due diligence, but this was the first deal where they opted for in-depth software due diligence by specialists. When it came to selecting a vendor, YieldDD stood out for a number of reasons. "Other than some of the bigger consultancies who provide similar services, YieldDD are specialists in this field. This is their core business and they bring a lot experience with them", says Laurens. Arthur adds:
Their approach is pragmatic yet thorough and very transparent. Upfront we knew exactly what to expect in terms of process and deliverables. It's in the nature of M&A transactions that they always have to end under time pressure. So we were very pleasantly surprised with YieldDD's flexibility and speed.
They could start right away when we needed them and they delivered their final report the day before Christmas. This allowed us to close the deal just before the end of the year."
No red flags with respect to scalability
What Plain Vanilla wanted answered specifically was if Euphoria's software could be the basis for growth and international expansion. Laurens explains:
Different countries have different requirements and regulations when it comes to the data that the meters have to register and store. It's not a matter of plug-and-play. A solution that works in the Netherlands may not work elsewhere. For Euphoria this might create complications for the organization of their IT infrastructure and their software."
Future growth may also come from adding new functionalities to Euphoria's software, enabling it to connect seamlessly with customers' financial and HR systems, for example. Again, legal and fiscal requirements to do so would vary from country to country, also creating potential complications. However, YieldDD's findings on the quality, security, technical debt and the development process of Euphoria's software did not raise any red flags with respect to scalability, and gave Plain Vanilla the assurances it sought.
Strengthening fundamentals and looking ahead
What did Plain Vanilla focus on in their first months as the new majority owners? "What often makes investing in mid-sized companies attractive are their entrepreneurial spirit and their large potential for growth", says Arthur. "Experience tells you however that in order to actually achieve such growth, you sometimes need to strengthen some fundamentals first. So we have been concentrating on creating a deeper understanding of the operations, streamlining core processes, defining key metrics and adding new personnel. At the same time we're already looking ahead. We're conducting detailed market research in various countries, both in Europe and further abroad. Our ambition is to create a few additional home markets and double Euphoria in size."