$CAD 160 Million Funding for Intelex is a Game-Changing Investment for the EH&S Software Market
In yet another sign of the booming EH&S software market, Intelex Technologies – a firm with 350 employees and over 1,000 customers – has raised $123 million ($CAD 160 million) from JMI Equity and HarbourVest. In the absence of disclosure from the investors, Verdantix estimates the valuation is approximately 3x revenues and 16x net profit based on standard valuation methods. Whilst the bulk of the cash is being used to buy out existing shareholders the remainder -- as yet undisclosed -- will be used to propel Intelex into the enterprise market segment; building on its strong foundations in large facilities, divisions and midsize firms. The huge funding round will also enable Intelex to open offices outside its current single location in Toronto.
This massive investment in Intelex is great news for customers seeking enterprise-class EH&S software. The cash will enable Intelex to develop a world class product and give global firms the confidence to invest for the long haul. There has been no comparable investment in an EH&S software firm in the history of the market. For competitors – even those backed by other venture capital and private equity funds – this is a game-changing moment. Funding rounds in the past have been between $10 million and $15 million and many of the investors in the EH&S software market do not even have total funds to invest above $100 million. Investors at funds like Actua, ETF, Level Equity and Boards of directors will need to undertake strategic reviews in anticipation of seismic change in the market from 2016.
Why are private equity firms willing to invest with so much confidence? Firstly, there is a lot of dry powder and few untapped enterprise software categories. Verdantix forecasts that spending on EH&S software will reach $667 million in eight of the world’s largest economies in 2015 and will grow by 15% annually to 2019. But the total potential addressable market for EH&S software is more than $5 billion when taking into account the global market and current levels of penetration. Top performers in the market, like Intelex and Enablon have been growing at between 25% and 40% per annum over the last 3 years. Intelex has achieved this growth without external investment. The enterprise market is ripe for consolidation as old environmental compliance IT systems reach a state of technical death and international firms seek EH&S platforms to replace a ragbag of legacy apps and disjointed processes.