For the second time in two weeks, a leading Toronto-based software company in the environmental health, safety and quality audit business has been sold to a U.S. buyer.
Pittsburgh-based Industrial Scientific said on Thursday that it had purchased Toronto-based Intelex Technologies for US$570-million. The sale follows last week’s purchase by private-equity giant Thoma Bravo LLC of a control stake in Cority Software Inc., in a deal that valued the firm – a rival to Intelex – at more than $500-million.
Both Intelex and Cority are believed to have revenues in the high tens of millions of dollars and were each controlled by private-equity firms prior to the transactions (JMI Equity and HarvourVest Partners LLC bought control of Intelex for $160-million in 2015). But the circumstances of the Intelex transaction are very different.
Last October, Intelex chief executive Mark Jaine – who joined the company 20 years ago when it had three employees, little revenue and a lot of debt – said in an interview he anticipated the company was about equally likely to go public or seek fresh private-equity financing within the next two years.
Within weeks, his thinking shifted about Intelex, which has more than 450 employees and about 1,100 customers ranging from industrial and manufacturing giants such as Magna International, Johnson & Johnson and NASA to Walmart, NBC Universal and Cirque du Soleil. He saw a gap between when customers experienced incidents such as workplace accidents or equipment malfunctions and when their staff recorded the events in the company’s software.
Mr. Jaine decided to seek out a strategic partner in the industrial Internet of Things sector that collected and processed data instantaneously from sensors connected to the Web – data he thought could someday be automatically uploaded into Intelex software, triggering needed actions much quicker for its customers. That would create what he calls a “digital nervous system" for corporations regarding environmental, health, safety and quality (EHSQ) matters, enabling Intelex to “eventually build an enterprise resource planning tool for operational excellence.”
He determined that partnering with a company such as Industrial Scientific – a connected sensing technology firm with 350,000 devices across 13,000 sites, and a subsidiary of NYSE-traded industrial technology giant Fortive Corp. – “made a lot more sense strategically” to accelerate Intelex’s growth than waiting to go public. “We were only looking for a strategic partner that would add value to our customers and allow us to differentiate and create incredible value to our customer base,” Mr. Jaine said.
Industrial Scientific president Justin McElhattan said in a statement: “We are building the company that our customers need – one capable of improving safety and productivity in the field while also being the system of record for EHSQ data. We are excited by the opportunity to expand our connected safety capabilities into the global EHSQ software space and beyond.”
Intelex was co-founded in 1992 by Mr. Jaine’s father, Andrew Jaine, and Ted Grunau. Mr. Jaine joined when he was 21 to head sales, and became president seven years later. “I didn’t climb any ladder, I just built the ladder under me,” he said. Earlier this decade, he led the company’s transformation from a provider of standard on-premise software to heavy industry clients to a cloud-based subscription software service. This broadened the customer base to such areas as retail and entertainment, and private-equity financiers were brought on to support the shift in its business model. The company has steadily increased revenues by 35 per cent or more per year – more than twice the growth rate in the EHSQ space.