There is now a little bidding war going on for SumTotal Systems. 
ACCEL-KKR, a private equity firm, outbid Vista Equity Partners by offering approximately $124 Million for the company. This bid is approximately 20% higher than the $103 Million offer which Vista extended in early April.This is a very positive thing - both for SumTotal as well as for the general HR software marketplace.
1. ACCELL-KKR understands the potential for SumTotal to grow.
Accel understands the potential for SumTotal in the talent management software market and is therefore willing to value the company at more than 1.1X sales. This valuation is still quite reasonable, considering the fact that faster growing companies like Taleo and SuccessFactors are selling at 2-3X sales.
The LMS market itself is growing at 8% or more, and the talent management software market is growing at over 25%. SumTotal, which is still primarily known as an LMS company, competes well in the market for integrated talent management software and has yet to leverage its opportunity here. Through the help of Accel-KKR, we believe SumTota could build new partnerships which may accelerate its growth to 20+% annually.
2. ACCELL-KKR has existing businesses in this market and can leverage this experience with SumTotal.
In late 2007 KKR acquired NorthgateArinso, a $1.2 Billion HR services provider headquartered in the UK. ACCELL-KKR sees the potential to bring together mid-sized players in HR software and build a larger player in integrated talent solutions. If this deal does go through, we may see ACCELL-KKR integrate these companies and perhaps even acquire other smaller players in this market.
3. Higher valuations for HR software companies help all market players:
Vendors have access to more capital, buyers can do business with more sustainable vendors, and investors feel more comfortable with the whole market.
4. SumTotal's relative newness to SaaS is not a negative.
Unlike some analysts, we do not believe that the SaaS will quickly "kill" the licensed software business for HR software. While most buyers today do prefer SaaS software today, many global corporations still prefer the licensed model and SumTotal is aggressively making the transition to this architecture.
Of course even with a new owner SumTotal must still execute well - and the company continues to face strong competition from Saba, Taleo, SuccessFactors, Stepstone, Cornerstone, Softscape, Plateau, and all the other LMS and talent management platform players in the market.
But as we spoke with SumTotal and Accel this week we feel positive. Accel-KKR spent over a year looking at this market and they have a track record of helping their investor companies grow, not just restructure. They have confidence in the SumTotal business and management team and will (if the acquisition goes through) bring additional resources, expertise, and partnerships to the company.
We know that products like SumTotal provide tremendous value to corporate buyers. With this new move, we hope that the financial markets will reaffirm their confidence in the talent management software market and all the players can benefit.
http://marketing.bersin.com/Learning_Management_Systems_LMS2009.html