Do the Sum of the Parts Add Up to the Whole?

On Monday, March 20th Cision announced it was going to combine with Capital Acquisition Corp. III and go IPO. The full press release is here.

Capitol Acquisition Corp. III has now entered into an agreement with Cision which anticipates the value of the company at $2.4B. That figure is a show stopper.

It implies that Cision is being sold for a 10.5x multiple of it’s projected 2017 EBITDA. That valuation is tremendous when you consider Vocus was 2.4x and Cision was 1.1x. Until PRNewswire entered the GTCR stable with an 11.2x of the company’s 2014 adjusted EBITDA.

GTCR PR Purchases:

Cision (2014) – $125.7M

Vocus (2014) – $446.6M

Visible Technologies (2014) – undisclosed but let’s guess a conservative $15M

Gorkana (2014) – ~ $125.7M

Viral Heat (2015) – undisclosed but let’s guess a conservative $15M

PR Newswire (2016) – $841M

Estimated acquisition total: $1.57B – not an exact figure since two acquisitions had undisclosed terms, but a good base to work from.

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 GTCR/Cision Sell Offs:

UK operations of Cision are sold to Vuelio (2015) ~$1.6M

PR Newswire’s Agility sold to Innodata (2016) $4.8M

Total Sales: $7.4M

That comes to an estimated $1.56B spend by GTCR to make a Goliath one-stop-shop PR and Marketing tool. On the surface it looks like a win. The company is going public for more than it spent to purchase pieces and parts to provide as many tools as possible in one location.

Where does this shift of focus leave current customers?

Cision has stated that it is focusing on the “market opportunity beyond…global communications intelligence software and services, into the marketing software market..and ultimately into the broader digital marketing and data markets.”

 CEO, Kevin Akeroyd sent out a letter to all users sharing the news of the IPO and assured customers that they will have better service than ever before. Below I’ve included the portion of that communication which highlights three aspects that current users are expected to find valuable.

• Expansion of our data-driven communications capabilities. We are investing in R&D that will help us build an “Influencer Graph,” which will help you link the consumption of your earned media coverage to key buying behaviors that you track on your website. This will help you demonstrate the ROI of your communications strategy to the broader business.
• More robust integration of PRNewswire into the Cision Communications Cloud™. To further deliver on our vision to combine PR software and press release distribution, we’ll soon be announcing that the majority of PR Newswire services can be accessed alongside all of the other Communications Cloud capabilities. This expands our ability to provide one central place to manage your communications.
• Expansion of our Insights offerings. We know software can’t solve all your communications needs. That’s why we’re investing in a robust professional services arm, the Cision Insights team, that can develop custom reporting and analysis about how your earned media impacts business results.

Do the sum of the parts add up to the whole?

That is the bigger question for customers to evaluate here. Providing a good product that is easy to use and adds value to a user’s day-to-day tasks and over-all business goals is not an easy task. It’s been three years since this experiment began. Some of the parts have very loyal users, specifically Gorkana and to some extent PRNewswire.

Do the sum of the parts add up to the whole? This I leave to you the consumer, investors and the market to suss out.