DowJones VentureWire | 8. Oktober 2009
IPO Hopeful Gomez Finds More Hope In Compuware's $295M Acquisition Offer
_Gomez Inc., a maker of software for monitoring Web sites, has forgone its second shot at
the public markets, instead accepting an unsolicited $295 million cash acquisition offer
by Compuware Corp.
_The company was actively pursuing a public offering, having updated its S-1 filing with the
Securities and Exchange Commission just three weeks ago.
_The deal represents a long - but successful - road to an exit for Dolphin Equity Partners,
Gomez's largest investor with a 38.6% stake in the company, according to its most recent S-1
_The firm led a $3 million recapitalization of Gomez in 2001, which effectively wiped out previous
investors who had backed away from the company, said Richard Brekka, a managing partner with Dolphin
Equity and chairman of Gomez's board of directors.
_"We always take a long-term view. A lot of these businesses that didn't make it would have, if
the investors took a long-term view," Brekka said.
_Dolphin Equity first invested in Gomez in a 2000 round worth about $40 million that was led by
BancBoston Ventures and included HarbourVest Partners, John Hancock Financial Services and Mobius
Venture Capital. The company took its first shot at a public offering later that year, but withdrew
a few months later. A second IPO filing came in May 2008.
_The company's current investors include AdAstra, with a 21.1% stake, Doughty Hanson & Co.,
with 17.8%, and ABS Ventures, which holds 9%. Those investors came into the company through acquisitions
and invested further capital in the two rounds that followed the recap, the most recent being a $6
million round in 2003. Harbinger/Aurora Ventures is also an investor.
_Including the cash raised prior to the recap, Gomez raised about $66 million.
_The Lexington, Mass.-based company provides software-as-a-service that enables companies to monitor
their Web applications. Rather than monitor those applications from inside the data center like products
from Compuware, Gomez's technology mimics online transactions to make sure everything operates as it
_The company was founded in 1997 to provide a service to analyze the Web sites of online banks and brokerages.
It later branched out into providing rankings of different Web services in about two dozen categories. At
the core of those rankings, the company created technology to monitor how well the sites were doing what
they promised to do.
_That technology was the reason Dolphin Equity decided to recap the company following the dot-com bust.
At that time, Web application monitoring was still "a nice-to-have," Brekka said, but "we believed over time,
more and more business would be done over the Web."
_As part of the company's strategy for the future, it began to expand to more products that monitor the
data center from the inside. In exploring partnerships with vendors that offer those products, Gomez received
an unsolicited offer from publicly traded Compuware, which it took because both companies had the same plan to
offer products that monitor Web applications from inside and outside the data center, said Jamie Ellertson,
Gomez's chief executive.
_The deal offers Gomez similar multiples to what it could get in the public markets and better access to capital
to grow the business, which was its ultimate goal with a public offering, Ellertson said.
_For the six months that ended in June, Gomez saw profit of $1.9 million on sales of $26.6 million, up from
the same period a year earlier when it had a loss of $868,000 on sales of $21.2 million.
_The acquisition deal is expected to close in November. When it does, all 272 employees of Gomez are expected
to join Detroit-based Compuware.