Globes, December 31, 2003
Netegrity buying Business Layers
|Waltham, Massachusetts-based Netegrity (Nasdaq:NETE) has acquired Israeli e-provisioning startup Business Layers for about $15 million cash plus $27.5 million in shares and cash.
The price is $7.5 below the total invested in Business Layers, which is $50.6 million. It represents a multiple of 4.5 times Business Layers' sales, which totaled about $10 million in 2003. But most of the Israeli investors, including Formula Ventures (funds 1 and 2), and the Israel Seed and Gemini venture capital funds, will at least be getting their investment back.
The Israeli venture capital funds each hold 10% to 15% of the company's shares. The U.S. venture capital fund Canaan is the biggest shareholder, with a 20% interest. The management and workers will be receiving about 30% of the proceeds for their shares.
Rumors about an imminent acquisition of Business Layers, which is almost breaking even, have been swirling for months. Estimates of its potential price had even reached hundreds of millions of dollars, based on studies by IDC and Gartner, claiming that the big boys - IBM, BMC, Netegrity and HP wanted to shove into e-provisioning, in which Business Layers is an industry leader.
Two direct rivals of Business Layers, Wave Set and Access 360, were also bought by Sun Microsystems and IBM, albeit for unknown sums.
"Netegrity plans to further integrate the provisioning technology within the Netegrity identity and access management solution and will also continue to invest in the provisioning technology as a stand alone product," the U.S. firm explained in its press release.
Business Layers was founded in 1999 by four men, including Izhar Shay, who serves as its CEO. The company developed software that essentially invented the e-provisioning market. E-provisioning refers to the efficient, automated provisioning of enterprise resources. More prosaically, it automates administrative processes such as hiring and firing. Say a person is hired: by feeding the appropriate data into the system, the software creates accounts and grants access to the required corporate systems, and also maintains the software. It can also automatically bar access to workers whose jobs are terminated.
Today Business Layers rules about a third of the e-provisioning arena.
Its flagship product, eProvision Day One, improves efficiency and lowers costs by rendering information working processes more efficient and safe for workers, suppliers and customers alike. For instance, the software assists in hiring and firing employees, and can translate a dismissal order into dozens of missions that ultimately detach the fired employee from email and other company systems.
Its customers include PricewaterhouseCoopers, BMC, RSA, Comverse Technologies (NASDAQ:CMVT) and Netegrity, which acquired it. Business Layers also has alliance agreements with Microsoft and Oracle.
Formula Ventures and Israel Seed invested in Business Layers at its seed stage in 1999. Gemini and Canaan joined later on.
Another of Business Layers' shareholders is Check Point Software Technologies (NASDAQ:CHKP) co-founder Shlomo Kramer, who holds a few shares. Ascent Venture Partners of Boston also holds shares.
In September 2000, Business Layers raised $25 million from shareholders at a post-money company value of $50 million. The company maintains headquarters in Rochelle Park, New Jersey, and an R&D center in Israel.