EtQ’s Strategy For The QMS And EHSQ Software Markets Validated By TCV Acquisition

On August 17, 2017 TCV a growth equity technology investor with $10 billion of funds under management announced it had acquired EtQ, the quality management (QMS) and environment, health and safety (EHS) software provider. The deal reflects the strong demand in the investment community for QMS and EHS software vendors with critical mass in resources, an established customer base and a successful product offering. Despite being founded in 1992, EtQ had not raised external investment to fund its growth and the three co-founders were able to select a financial partner who aligned with their vision. Aside from the fact that TCV is the majority shareholder of EtQ, no other details were disclosed on valuation.

Following the acquisition, EtQ will continue to be run as an independent business and there are no imminent changes planned to the management team. TCV has bought into the EtQ business strategy which focuses on the quality management software and EHS software markets, as well as on specific segments such as aviation safety, food safety and compliance for life sciences firms. This provides EtQ with a total addressable market in 2018 of more than $2 billion with long-term upside given penetration rates of 15% to 30% depending on country and industry. With additional resources, the scope of EtQ’s strategy could be expanded into contiguous markets.

The message from EtQ management is one of continuity which is good news for customers. In contrast to being acquired by a trade buyer there will be less organizational disruption as a TCV portfolio firm. EtQ now has unquestionable financial stability and significantly more cash to invest in product innovation. Given the multitude of other investments in the EHS software market in 2016 and 2017, selling a majority stake in the business in 2017 is a smart move. Verdantix believes that vendors without significant funding will struggle to cope with the rapid product innovation, hefty marketing budgets and expanded sales teams of investor-funded competitors.

In the July 2017 Verdantix benchmark of twenty EHS software vendors, EtQ was rated as one of the market leaders for the first time. We anticipate the TCV acquisition will enable EtQ to accelerate the roll out of the EHS software product roadmap in 2018.

For more information on the EHS software market apply to attend the forthcoming webinar ‘New EHS Software Benchmark: How To Select The Best Fit Vendor’ on August 24th.