Ex Libris will soon change ownership from one private equity firm to another. The company is to be acquired by Golden Gate Capital (http://goldengatecap.com/), a major private equity firm managing funds representing more than $12 billion in capital. Golden Gate Capital invests in the software and information technology sector in addition to many other industries. According to Matti Shem Tov, Chief Executive Officer of Ex Libris, this transition should not be considered a major event from its library customers' and employees' perspective. The new owners will retain the current management, workforce, and operating locations. Yet, with new ownership comes a new Board of Directors that will oversee the company and set its high-level business plan.
Ex Libris Group's strategic products focus on the academic and research library arena and include the Aleph and Voyager integrated library systems, the Primo discovery product and its Central Index, the, Rosetta digital preservation platform, the SFX link resolver, the Verde electronic resource management system, the MetaLib federated search, as well as Alma, the company's newest offering, a library services platform based on the concepts of unified resource management and cloud computing.
Through its business history of more than 20 years, Ex Libris has risen to become one of the largest, if not the largest, companies in the library automation industry, depending on whether measuring revenues, libraries served, or personnel employed. The company has maintained its focus on academic and research libraries, both individually and in consortia. Many of the consortia using Ex Libris products include public or special libraries in addition to academics. Ex Libris products find use in many national libraries, including the Library of Congress, the British Library, the National Library of China, and The National Diet Library of Japan. Indicative of its success with large academic libraries, Ex Libris has a high level of involvement with the members of the Association of Research Libraries, which includes the largest research libraries in the United States and Canada. Of its 125 members, 24 use Aleph,35 run Voyager, and another 5 have signed for Alma; many others use SFX or Primo.
Strategic Research and Development
Ex Libris has distinguished itself as a company in the library automation industry that invests heavily in research and development, creating new products and new product categories that support a strategy of long-term growth. At the end of 2011, Ex Libris employed a workforce totaling 512 personnel, with 170 dedicated to development, or around 33 percent. The table below demonstrates that Ex Libris embraces a stronger orientation toward research and development than other companies in the industry with complete or partial private equity ownership.
|Company||Total||FTE Development||FTE Percent|
Golden Gate and Infor and Ex Libris?
Golden Gate Capital also has an ownership interest in Infor Library and Information Solutions. In March 2006, the company acquired Geac, one of the pioneering firms in the library automation industry. Even though library automation was at one point one of Geac's principal business activities, by the time that it was acquired by Golden Gate Capital for around $1.0 billion, it was involved in many other IT sectors, with libraries representing a very small proportion of revenues. Under the ownership of Golden Gate Capital, Geac was initially folded into one of its existing portfolio companies named Extensity and only months later transferred to Infor. Infor Global Solutions ranks as a company many times larger than the former Geac, offering enterprise applications and services across many different industry sectors. Today, Infor Library and Information Solutions sits as a relatively small business unit within Infor Public Sector, which is one of 14 areas to which Infor provides products. According to a recent company fact sheet, Infor takes in around $2.8 billion annually. Golden Gate Capital made a substantial new investment in Infor in April 2012, joined by Summit Partners, to recapitalize the company and to support a merger with Lawson Software, which produces a competing ERP solution and other business software products. Through its association with Golden Gate Capital, Ex Libris gains at least indirect ties so some of the largest companies in the global IT business sector.
The common ownership of Infor Library and Information Solutions and Ex Libris Group by Golden Gate Capital, while it sparks interest, does not necessarily imply short-term changes for either company. The two companies address two different library sectors, with Ex Libris focused on research academic libraries and the Vubis Smart and V-smart systems from Infor Library and Information Systems used primarily by public libraries. While Ex Libris Group has library customers in almost every global region, Infor's library customers are concentrated in the Benelux area of Europe, the United Kingdom, France, and Canada, with a smaller presence in other countries such as the United States and Australia.
The definitive agreement for Golden Gate Capital to acquire Ex Libris Group was signed on November 14, 2012, with the deal expected to close by mid-December. Financial details of the transaction have not been revealed. Globes, an Israel-based business publication, estimated the value of the transaction in the range of $250-300 million (http://www.globes.co.il/serveen/ globes/docview.asp?did=1000799064).
Ex Libris' Corporate and Investment History
Ex Libris traces its roots to efforts to create automation software for the libraries of Hebrew University of Jerusalem, beginning in 1980. The Automated Library Expandable Program, or ALEPH-100, system soon attracted interest by other universities. Yissum, the technology transfer unit of the University, facilitated the formation of a new company called Aleph Yissum to further develop and commercialize the software. Azriel Morag, an Israeli businessman with experience in the software industry, was recruited to lead the company. In 1986, another company was formed, Ex Libris, Ltd., to market the software outside of Israel, with Morag as its principal owner. Aleph Yissum and Ex Libris, Ltd. were merged in 1995 and shortly reorganized under the name Ex Libris Group. In July 1997, Ex Libris acquired a German company Dabis and its BIS automation product used by around 300 academic libraries.
In 1999, two Israel-based venture capital firms, Walden Israel and Tamar Ventures, made a combined $4 million investment in Ex Libris. The injection funded the company's entry into the United States and commercialization of the SFX linking technology, which it acquired from Ghent University. At this point, Morag and other company executives, Hebrew University of Jerusalem (30%), Walden Israel (20%), and Tamar Ventures (20%) shared ownership of the company. In addition to SFX, the company created a variety of other products to support academic libraries, such as the MetaLib federated search tool, Verde electronic resource management system, and DigiTool digital collections platform.
Beginning in 2005, Ex Libris Group began exploring other investment opportunities. In September 2005, the company attempted an initial public offering on the AIM (Alternative Investment Market) of the London Stock Exchange. At this point, Morag retired from Ex Libris, selling his ownership stake to the other investors. The IPO failed to generate the anticipated capital and was withdrawn.
Francisco Partners, a San Francisco-based private equity firm acquired Ex Libris Group in June 2006 for $62 million, marking a major transformation of the academic library automation sector. In a subsequent transaction in November 2006, Ex Libris, with support from Francisco Partners, also acquired Endeavor Information Systems from Elsevier. This merged company went forward with two flagship ILS products, Aleph and Voyager, continuing ongoing development, marketing, and support for both. One of the key strategic products created during this period was Primo, positioned as a discovery and delivery interface for academic libraries, which could be used not only with both Aleph and Voyager, but with the ILS products from competing companies. The company also invested in the development of Rosetta, a new digital preservation platform created in partnership with the National Library of New Zealand going to general release in January 2009.
Francisco Partners held on to this investment for just past two years, selling Ex Libris Group to Leeds Equity Partners in August 2008 for an estimated $150 million. Shortly after the acquisition by Leeds, the company began the development of a new Unified Resource Management product, subsequently branded as Alma. As a new library services platform built from the ground up, Alma represented a significant research and development project. Offering a forward migration path for both for existing customers Aleph and Voyager, Alma also held potential for attracting new library customers using ILS products from competing companies.
The sale to Golden Gate Capital comes during the phase where the initial version of Alma has been created and initial production implementation is underway in libraries such as Boston College, Fort Hays State University, and the University of East London. Many other academic libraries, including a contingent of development partners and early adopters, are on track to also place the software into production use in the coming months. The company is now positioned to begin reaping the benefits of the investment in the development of Alma as it enters its full marketing cycle. With the Alma now complete and Primo in its fourth major release, Ex Libris can be expected to be a formidable competitor in the academic library niche. The challenge for Ex Libris under its new ownership will be to not only reap the short-term rewards sown in previous rounds of investment, but to continue new developments that will benefit its libraries and its bottom line in the long term.