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EXACT SHARES DELIST; AND A LESSON Featured

Shares of Exact Holding stopped trading on March 31 as its purchase by Apax Partners kicked in. Presumably, we will start seeing some changes under the new owners. The fact Exact is no longer public is something that was obviously going to happen with the purchase. But it emphasizes the role of private equity in this market, shown by the number of news items in this newsletter that involve private equity ownership of business software.

I have repeated more than once Apax's position that public investors would likely not have patience with a company as it invests to make the move to the cloud. But the next step of thinking is "What do these funds get out of this exercise?" Taking companies public again is one obvious answer or building them up and selling them is another. However, most of these financial software businesses are not going to show the kind of increases in revenue that would ever make them growth stocks. I have to think that one of the real rewards (or at least, fuel) is the cash generated by subscriptions as the move to the cloud kicks in. Midmarket ERP companies are not going to amass a huge base of customers. But with the price of their products, they don't need to. Take some of the per user pricing we hear from midmarket cloud companies and multiply that by a few thousand users and the cash flow quickly becomes significant and very predictable. I'm an amateur in this area, but I think this view makes sense.

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