Creating Value in a Data Analytics Software Carve-out

Background

Our team has significant experience in corporate carve-outs which can represent potential opportunities to enhance growth and improve the positioning of corporate divisions which are no longer core and yet have attractive fundamental attributes. These transactions require in-depth operating skills and hands-on experience managing through the transition of establishing standalone operations and often increasing investment to reinvigorate sales, marketing and product development. Our team identified such an opportunity which fit with an investment thesis we were pursuing in data analytics. In 2008 the team at Silver Lake Sumeru carved-out i2 Technologies from ChoicePoint, a public company. i2 develops, supports and sells analytics software that enables its customers to use advanced analysis and visualization technology to manage and solve investigations. Customers include law enforcement, military, homeland security and defense, intelligence, and other governmental agencies.

Value Creation

Working with the team at i2, we developed a plan to establish fully independent operations, strengthen sales and marketing, rejuvenate the product roadmap and pursue a complementary acquisition to expand into adjacent markets. Key elements of the plan included:

  • Quickly establishing standalone operations in the U.S. and Europe with independent corporate functions in Finance, IT, and HR to support the business post-carve out.
  • Expanding the organization by hiring a new CEO, COO and Head of Sales and re-organizing the sales team around specific go-to-market channels.
  • Working with the company’s engineering team to develop an enterprise software architecture, which enabled improved connections among analysts and provided enterprise-level access to data and analytics tools.
  • Making two complementary add-on acquisitions that broadened i2’s product offering and expanded its customer base in the U.S. and overseas.

Results

Over the three-year investment period, i2’s revenues increased over 25% and EBITDA increased over 50% driven by sales growth and scale efficiencies while the number of employees grew nearly 20%. The business attracted interest from a number of strategic buyers and was sold to IBM in 2011.