Roper Industries (ROP) calls itself a "diversified growth company" that provides a wide assortment of engineered products for energy systems, imaging and even radio-frequency applications. To grow its business, the company focuses on acquisitions, which are usually smaller bolt-on deals.
It's a strategy that has been paying off: Roper's shares are up a hefty 41% over the past 12 months.
But this week, Roper got much more aggressive. The company agreed to shell out $525 million for iTradeNetwork, a supply-chain software operator that's focused on the food industry. The firm is backed by venture investor Accel-KKR.
A Look at iTradeNetwork
Founded in 1999, iTradeNetwork is now a leading platform that facilitates transactions between retail grocers, restaurant chains and food-service distributors. Essentially, the company helps solve a variety of tough problems like standardizing complex catalogs and reconciling SKUs, using a cloud-based application that makes it easier to update and centralize data sources.
All in all, the system has proven effective in helping customers reduce supply-chain costs, improve compliance, strengthen partner relationships and even increase revenues. In light of the benefits it provides, it's no surprise that iTradeNetwork has over 6,200 customers and transacts more than $250 billion in business annually.
And yes, the company does have synergies with Roper, which had already been building its cloud-computing offerings in the food-service segment, such as with its Freight Matching business and Horizon Software/CBORD.
Roper did not provide much detail on iTradeNetwork's financials. But apparently the company generates strong cash flows and 97% of revenues are recurring with long-term subscription contracts. (Its renewal rates are 99%.)
In fact, it looks like this will not be the end of the deal-making in the food-service software space. The market is enormous, especially in terms of the global opportunities.
Wall Street isn't seeing any problems yet with the iTradeNetwork transaction. In Monday's trading, Roper's shares were up 4.5% early before settling down to a 2% or so gain for most of the day. The company also raised its full-year earnings outlook from $2.95-$3.10 to $3.05-$3.15.
Managing your Portfolio
Keeping your portfolio and financial life fit!View Course »