Deltek Systems blows onto Nasdaq scene with IPO

FORT COLLINS – The public can now get a piece of one of Fort Collins’ big software success stories.

Deltek Systems Inc., which purchased Fort Collins-based Wind2 Software Inc. in late 2005, made an initial public offering on the Nasdaq exchange Nov. 1. The enterprise-software management company sold 9 million shares at $18 per share.

The company earlier had anticipated the offering to be priced between $17 and $19. The stock faltered slightly in its first few weeks, down to under $16 as of Nov. 15. But the IPO allowed the company to shed the private equity owner it gained only a few years earlier.

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For most of Deltek’s 24 years, the business was family owned. However, in April 2005, private equity firm New Mountain Capital gained 75 percent ownership of the $123 million company. The deal provided the funds Deltek needed to begin a fairly aggressive acquisition campaign that netted five companies in two years.

“That’s a part of our operating structure,´ said Warren Brown, vice president of strategic communications, of the acquisition trail. “It’s really about being able to expand the product portfolio.”

Acquisition isn’t the only growth strategy for Deltek, though. Brown said that organic growth has also been very important to the company and that new product development is ongoing.

Nor will the IPO speed up or slow down the company’s acquisition ambitions.

“Acquisition really isn’t linked to the IPO,” Brown said. “Our overall strategy has not changed. It’s just business as usual.”

Growth in market predicted

Business as usual has a pretty good outlook. Brown cited a report from research firm IDC that predicted the worldwide market for enterprise-management software would grow from $17.5 billion in 2005 to $23 billion in 2010.

Deltek serves a niche of that market, with a focus on project-driven professional services firms, such as architecture and construction companies. In its segment, Deltek is the market leader. In 2006, the company reported revenues of $75 million and a net income of $15.3 million.

By maintaining its focus, the company hopes to continue its dominance in the market and continue its growth. Brown said Deltek would likely reach 2,000 employees by the end of 2008 although there are no acquisition targets on the screen right now. Deltek has 75 employees in Fort Collins, with a couple of vacancies waiting to be filled, according to the company’s Web site.

Wind2 came to Fort Collins as a spin-off from Laramie, Wyo.-based Mariah Associates Inc., an environmental-consulting firm. The company pulled its name from the predecessor company, which came from a Native American word for wind. The company grew from two original employees to more than 75 in five locations across the country and about $10 million in revenue leading up to the acquisition.

Former competitors

Wind2 was an obvious acquisition for Deltek, as the two companies actually competed in the same market space.

“We were competitors,´ said Dave Marvin, a vice president for Deltek and former Wind2 CEO. He explained that there were certain aspects of Wind2’s products that could be integrated into those developed by Deltek.

At the time of the acquisition, Wind2 had about 3,000 customers – a substantial number, considering that Deltek today boasts a customer list 12,000 strong.

But Marvin said the acquisition was about more than the product offerings.

“We had a lot of good people, and finding good people isn’t easy,” he explained. Keeping those employees was a major concern for the company.

“We worked very hard prior to the close of the deal to develop a good integration plan,” Marvin said. “The goal was maximum employee retention.”

Wind2 employed about 85 people at its five locations when it was acquired. Today, the Fort Collins location alone employs 75. Only the Florida location was discontinued, with offices in Toronto, Los Angeles and Minneapolis still active.

Overall, the integration of Wind2 into Deltek took only six months and was rather seamless. Brown, who joined Deltek after the Wind2 acquisition, said he had no idea that it was once part of a separate company when he was hired. Marvin attributes this seamlessness to the extensive pre-acquisition planning.

“It’s about doing something together that’s bigger than what you can do apart,” he said.