TEM Changing of the Guard: Marlin Equity Purchases Tangoe

Marlin Equity Partners late last month announced an agreement to purchase Tangoe for $6.50 per share. Marlin, an investment firm with more than $3 billion under management, owns telecom expense and enterprise mobility management vendor Asentinel. This agreement is structured as a merger between Asentinel and Tangoe, and will lead to a company that will manage more than $38 billion in telecom and IT spend.

This transaction is scheduled to close late in Q2 2017, pending approval for all relevant conditions. With the completion of this merger, Tangoe CEO Jim Foy will be CEO and Asentinel CEO Tim Whitehorn will be chief product officer of the combined company.

Tangoe's Wild Ride as TEM Market Leader

Tangoe has been the market leader in telecom expense management (TEM) this decade, both through organic growth and through a wild ride of M&A activity that included the acquisitions of Traq Wireless, Information Strategies Group, InterNoded, Telwares, ProfitLine, HCL (Control Point Solutions), Symphony Teleca, Anomalous Networks, ttMobiles, Rivermine, and Vodafone Global.

As part of this growth arc, Tangoe went public on July 27, 2011, opening at $11 per share on the NASDAQ stock exchange. Over the next couple of years, Tangoe became known as successful enterprise mobility vendor, resulting in a peak value of more than $25 per share and a market cap of approximately $1 billion in October 2013. After that point, Tangoe's stock price started to suffer as the company took on the challenge of consolidating the platforms, sales, support, and solutions that it had rolled up over the past decade.

After an earnings miss in August 2015, Tangoe's stock moved into the single-digit price range. This financial was exacerbated in March 2016 when Tangoe announced that it would restate financials from 2013, 2014, and 2015.

Following this restatement came a tumultuous period in which Tangoe's founder and CEO, Al Subbloie, resigned and, in a furious cycle of activity, independent investors took a variety of positions in the company's stock. This investment activity led to the potential for a private takeover, as Tangoe's stock started to steadily decline and investors jockeyed for position. However, amid all of this corporate turmoil, Tangoe's revenue and customer base stayed relatively stable and the company realized an annual revenue run rate north of $200 million per year.

As a result, Tangoe announced this past Jan. 3 that it had received two offers: one from Marlin for $7.50 per share and one from Clearlake Capital Group and Vector Capital for $7 per share.

In combination with Tangoe's inability to resolve its financial statements in a timely matter and subsequent delisting from NASDAQ on March 10, it was only a matter of time before one of the stated offers or another third-party offer came in to acquire Tangoe. At this price and with its current client list and revenue and public-facing challenges, this would be a good time to go private and rebuild without dealing with the distractions of public filings.

Asentinel's Rapid Growth as a Marlin-backed Company

Asentinel has been a longtime market leader in TEM based on the strength of its technology platform and augmented with services over the past several years. It's gone through its own private equity-driven transformation over the past couple of years, including the following transactions:

  • On Jan. 12, 2015, Marlin announced the Asentinel acquisition. Marlin was an experienced investor in TEM, having been a prior owner of Rivermine (currently part of Tangoe) when it was a part of Emptoris.

  • On Oct. 20, 2015, Asentinel acquired eMobus, which provided a managed mobility services solution to accompany Asentinel's existing network and wireless capabilities.
  • And on June 2, 2016, Asentinel acquired Anatole, which was a significant move in further establishing its footprint in Europe. Anatole was previously the market leader in European TEM and one of the few TEM vendors in Europe that had established significant revenue across multiple countries.

Next Up for Tangoe, Asentinel... and the TEM Industry?

For potential Tangoe or Asentinel customers, the immediate challenge is to consider Tangoe and Asentinel as a combined entity rather than as separate vendors. While this means considering Tangoe's experience with $34 billion in spend under management as well as Asentinel's strong European footprint, it also requires additional work in picking and choosing which aspects of each company will be most important for the enterprise.

In addition, enterprise telecom managers should look closely at the Asentinel-Rivermine integration roadmap. Tangoe features a variety of interesting customized Rivermine implementations that support IT financial management, utilities, and other non-telecom assets and spend both from an invoice and vendor management perspective.

This acquisition/merger also serves as a changing of the guard. For years, Tangoe had provided core thought leadership for the TEM industry due to its sheer size and the view of Subbloie, when CEO. Even if the same company will be pushing thought leadership going forward, the combination of executive turnover and mergers means the messaging must change.

Overall, the Tangoe acquisition marks the end of an era, as the standalone TEM market leader changes from founder-led public company to a private company with executives largely chosen or associated with Marlin Equity. This is not an unusual change for a company as it grows well beyond $100 million in annual revenue, but it is a marked change.

Next up, this combined company, along with the rest of the TEM industry, will need to figure out how to handle the future of the Internet of Things, cloud cost management both for software and infrastructure, and the challenges of managing the costs, invoices, contracts, and vendor relationships for a wide variety of IT categories that TEM is designed to manage in granular detail.

Next month, I'll take a look at how TEM solutions are being pushed beyond traditional telecom, network, and mobility costs to support new costs, including those associated with IoT initiatives and SaaS subscriptions.