Is Oracle’s $1.6 billion bid for Aconex a wake-up call to local investors sleeping on tech startups?


Former Smart50 finalist and listed cloud tech company Aconex has become the latest Aussie startup success story to hit the headlines, after it was revealed the company would be acquired by US tech giant Oracle, in a deal that’s sent a “wake up call” to fund managers and investors.

Founded in 2000, Aconex is a software as a service company providing product management to business clients in areas such as construction, power, and mining. It was founded by Leigh Jasper and Robert Phillpot, who famously conceptualised the company during weekly squash games in the late 1990s.

Fairfax reports multinational technology corporation Oracle intends to acquire Aconex in a deal worth $1.6 billion, offering shareholders $7.80 a share. Jasper will remain on at the company.

“The Aconex and Oracle businesses are a great, natural fit and highly complementary in terms of vision, product, people and geography,” Jasper said in a statement to the Australian Stock Exchange.

“As co-founders of Aconex, both Rob Phillpot and I remain committed to the business and are excited about the opportunity to advance our collective vision on a larger scale, and the benefits this combination will deliver to our customers.”

Aconex has seen significant success over its nearly 18-year existence, booking $123.4 million in revenue for the 2016 financial year. The company floated for $140 million in 2014, and at the time Jasper told SmartCompany the founders knew it “was the right time to go to market”.

“I think there is so much opportunity ahead, there is years of growth yet, so it felt like the right time to take advantage and get that financial flexibility,” he said at the time.

The deal is yet to be finalised, but Aconex’s board has unanimously recommended the acquisition. Mike Sicilia, senior vice president and general manager of Oracle’s construction and engineering global business unit, told the ASX the acquisition of the project management company is essential as “delivering projects on time and on budget are the highest strategic imperatives for any engineering and construction organisation”.

“With the addition of Aconex, we significantly advance our vision of offering the most comprehensive cloud-based project management solution for this $14 trillion industry,” he said.

Billion-dollar acquisition a wake-up call for Aussie investors

As the dust settles, a number of figures in the Australian startup scene have congratulated the Aconex founders on their achievement. But they also warned investors to not ignore the potential behind tech companies.

“To local fundies who don’t believe in tech, 47% premium will hurt a lot? (Most shorted stock by cap on ASX, 10th today)”, Atlassian co-founder Mike Cannon-Brookes tweeted on Monday, saying the acquisition was a “big win” for Aussie tech.

Square Peg founder Paul Bassat also commented on the acquisition, saying while some people were disappointed, there were “more positives than negatives”.

“[A] sign of the [development] of our tech ecosystem. These acquisitions put Aussie tech on the map,” he said on Twitter.

Speaking to StartupSmart, managing director of venture capital at Blue Sky Ventures Elaine Stead said the Aconex acquisition shows how a company with good product can still be “highly valued”, even when “not profitable because it’s investing in growth”.

“I think the Australian entrepreneurial landscape is incredibly fertile and has the right fundamentals to thrive right now, and we are seeing that in our fund with the sheer quantity and quality of opportunities we see year-on-year,” she says.

“While the likes of Aconex are not companies that have been built in a day, I think they show that world-class companies can be built and grown from Australia, and deliver fantastic returns to founders and investors alike — its great inspiration to the current and future crop of new industry companies.”

Speaking to Cannon-Brookes’ comments on investors sleeping on opportunities like Aconex, managing partner of Rampersand Fund Paul Naphtali says the amount of short positions on Aconex’s stocks shows there’s a long way to go with Australian investors and analysts understanding Australian tech companies.

“Hopefully those fund managers with a hole in their Christmas bonuses have had a bit of a wake-up call,” he says.

But Stead disagrees, saying the acquisition isn’t so much a wake-up call, but a reinforcement to investors that acquisitions like this are truly possible, and not a “made-up blue sky outcome”.

However, in the broader context of tech startups listed on the ASX, Naphtali says there are a number of companies with low revenue but “massive” valuations, and he believes it’s anyone’s guess to what investors in public companies “actually think of the technology sector, besides not really understanding it”.

“What I do know is over the past five years we have seen more and more investors moving from listed equities to private equity and VC, allowing us to really support the up and coming startups, and that’s where the real growth in the market will come from,” he says.

“Since launching rampersand four years ago, it’s been exciting to see many more investors taking much more notice of tech over the past five years, but nothing wakes them up like a $1b+ acquisition by a top-tier US company.”

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