BCG backs $12.5 million funding round of French software firm CAST

13 June 2018

Strategy consulting firm BCG has invested in French software giant CAST as European tech companies enjoy a recent resurgence in funding from venture capital and private equity sources. Consultancy partnerships are among CAST’s major strengths and BCG’s vote of confidence comes after a period of unrivalled technological innovation for the firm.

A pioneer in the emerging field of software intelligence, CAST provides its global clients with analytics-based insights. Many of the firm’s clients are listed on Forbes Global 2000 (including Wells Fargo and General Electric) and value CAST’s ability to identify and treat software weak points before they become major commercial headaches. 

Founded in 1990 and headquartered in Paris, the firm commanded revenues surpassing €36 million in 2017. Having invested almost €20 million in technology innovation in the past three years, the company – led by founder Vincent Delaroche – hopes to continue its dynamic growth thanks to a successful round of capital funding in which $12.5 million (€10.7 million) was raised. 

Leading strategy consultancy the Boston Consulting Group (BCG) was among the backers. Precisely how much support the consulting firm provided is unclear but French investment firms Keren Finance and CM-CIC investment are known to have made substantial contributions.BCG backs $12.5 million funding round of French software firm CASTCAST’s growth acceleration plan involves expanding its client base, and partnerships with professional services players that serve as implementation and knowledge partners. Among these partners are BCG, but also McKinsey & Company, and IT consultancies Accenture, Cognizant and IBM. CAST also works closely with a range of technology consulting firms involved in cloud migration, IT architecture and cybersecurity.

In funding the firm, BCG is backing a horse that enjoyed 27.9% growth in Q1 of 2018. The specialised portfolio analysis practice, CAST Highlight, even recorded an enviable 212% quarter-on-quarter growth. Within two years the firm’s senior leadership is expecting 15% CAGR and profitability in the double digits. 

The American consultancy has a stake in CAST’s success outside of its financial commitment. In 2015 the two firms signed a strategic partnership to incorporate CAST’s software intelligence platform into BCG’s Technology Advantage practice.

Firms struggling with turning M&A deals into equity value

18 April 2019

At a time when merger & acquisition activity is on a high, new research highlights that a majority of deals closed aren’t in fact contributing to equity improvements. 

To come to their conclusion, researchers at Willis Towers Watson and Cass Business School analysed the performance of all deals closed in the first quarter of this year with a deal value of above $100 million. For all those deals, 180 in total, the share price of the acquirer was tracked, and benchmarked against an index (MSCI World Index) which monitors equity performance across 20+ developed countries. 

The analysis found that across all regions globally, deals on average had a negative result on the equity value of the acquiring party. Buyers in North America and Asia-Pacific in particular struggled with value creation from their acquisitions. In the US and Canada, companies that were involved in a takeover or merger had a negative performance of 10.1 percentage points compared to the North American index. Asia Pacific buyers lagged 5.0 percentage points behind their regional index. 

Globally, the average stood at 5.4 percentage points behind the index. “The international M&A market as a whole is showing disappointing results, on the back of a volatile transaction climate and global political uncertainty, from trade wars to increasing protectionism,” said Gabe Langerak, a Dutchman who leads Willis Towers Watson’s Mergers & Acquisitions practice for Western Europe.Firms struggling with turning M&A deals into equity valueEurope however bucks the trend and is the only region where large mergers & acquisitions in the first quarter of 2019 had a positive impact on the stock prices (2.8%). Langerak: “The relatively stable – or less unstable – political and economic situation seems to turn out beneficial, and as a result European companies have outperformed their international peers.” It is not just a short term catch – the continent has been performing better for years, with the three-year average at 5.1% above the index. 

Striking, according to the researchers, is that international deals are outperforming national deals. For example, cross-border transactions score 0.9% higher than the index, while cross-regional deals even surpass the index by 3.1%. 

While the ‘financial’ performance of M&A deals is by no means impressive, there are however little signs of deal activity to slow in 2019. “Growing cash reserves, technological disruption and the stagnating growth of emerging markets are still pushing companies towards the M&A market,” explained Langerak. A recent report by Bain & Company found that global merger and acquisition activity spiked last year, growing from $2.9 trillion in 2017 to $3.4 trillion in 2018

The role of private equity, which accounts for a large share of deal activity, is another force lifting M&A activity. Investors are cash rich, and face pressures to spend the money in order to help their backers (mostly institutional investors and family offices) reap better than market average returns. According to one estimate, private equity now sits on $1.7 trillion of funds that is available but can’t be invested (‘dry powder’), with investors struggling with higher multiple and a limited supply of top, well priced targets. “As potential candidates now seem more expensive than during previous M&A peaks, such as in 1999 and 2008, it is more difficult than ever to close successful deals.” 

Langerak concludes with a tip for deal makers; “For M&A experts that want to make a move, it is key to focus on selecting the right acquisition candidates. Proper preparation, integration and the right people are essential to gain the right insights before taking a leap.”