Datamonitor puts $80m price tag on Ovum

Europe’s largest analyst firm, Datamonitor, is to purchase Ovum, Europe’s largest technology and telecoms analysts. The deal values Ovum at slightly under $80 million. The news comes shortly after Anthony Parslow, the former Forrester COO in Europe, joined Datamonitor’s Executive Management Committee to oversee acquisitions and operations at the firm.

While some of Ovum’s shareholders might have preferred a purchase by US firms like Forrester, IDC or Yankee, Datamonitor’s offer is hard to argue with. In trading today, Ovum’s shares rose quickly by over 47%. Datamonitor will pay a 50% premium on Ovum’s previous stock market price to buy the firm. Ovum’s board is recommending that offer is accepted and, since the board and staff own a part of the firm, around two-fifths of the shareholding has already agreed the sale.

Datamonitor is around three times Ovum’s revenues, and has the experience of acquiring five other established research firms, including British technology analysts Computergram and Butler, since its IPO in 2000. It has grown fast in recent years, both in revenues and in the industry-scope and international reach of its research.

Datamonitor and Ovum are stressing the continuity built into the deal: Ovum’s offices and employees will be maintained. Richard Holway, one of the principal gainers from the purchase, is expected to continue to advise Ovum. However, there will be changes. Datamonitor aims to grow revenues from Ovum clients by offering them its greater industry reach, suggesting closer ties in the sales forces within the Datamonitor group. Rapidly, there will be substantial savings from combining back office operations and pooling the costly reporting costs of the two public companies.

The high price reflects more than Ovum’s recent strong performance and canny acquisitions. Over seventy percent of Ovum’s revenues now come from renewable annual subscriptions, offering Datamonitor greater confidence in valuing the future cash flows from Ovum.

P.S. Parslow was one of Forrester’s three COO, managing the firm in EMEA. I still have a small shareholding in Ovum, left over from when I worked there in the 1990s: To avoid any appearance of conflict of interest, I agreed some years ago to donate all profits from any future sale of the shares.
P.P.S. The Ovum board owns 12% of the firm, which is pretty sizable but smaller than the holdings of the key institutions. None of Ovum’s original founders are on the board, and many of them sold their holdings in the firm’s IPO. However, a number of staff, former staff and their family members continue to hold shares.

Duncan Chapple

Duncan Chapple is the preeminent consultant on optimising international analyst relations and the value created by analyst firms. As SageCircle research director, Chapple directs programs that assess and increase the business value of relationships with industry analysts and sourcing advisors.