Magnitude Software Takes $179M from Private Equity Firm 3i Group

Austin—[Updated 10:10 a.m. See below.] Magnitude Software is selling a $179 million stake in the company to London-based private equity firm 3i Group.

Chris Ney, the founder, chairman, and CEO of Magnitude, is investing alongside 3i, the company announced. The company didn’t say whether the PE firm’s investment gave it a controlling interest. Magnitude said it intends to use the money to increase its customer base beyond the 1,400 it already has worldwide, a list that includes half of the Fortune 100.

Magnitude’s last financing round was in 2014, a $100 million investment from middle-market private equity firm Audax Group made in the months after Magnitude was formed through the merger of two businesses. Ney also made a “significant personal investment” at the time, according to the company. 3i acquired Audax’s equity stake in the new investment. The company said it is now valued at $340 million. [Paragraph updated to include information about the 3i investment.]

Magnitude was created through combining two 1990’s-era software companies. One of the companies, Burlington, MA-based Kalido, was created as a division of Royal Dutch Shell in 1997, then spun off as a private business in 2003. The second, Noetix, was founded in 1994, later acquired, spun out, then operated independently for 13 years before being acquired, once more, in 2013. That’s where Magnitude and Ney enter the picture.

Ney co-founded Silverback Enterprise Group in 2010 with the backing of Austin Ventures, a stalwart investment firm in Austin. Silverback’s mandate was to acquire and build enterprise software companies. It bought Noetix in June 2013, then acquired Kalido the following October. Silverback then rolled up the complementary companies into a single entity, Magnitude, in April 2014. Later that year, the firm announced Magnitude would be headquartered in Austin, plus the news of the $100 million investment from Audax.

Magnitude was formed to offer businesses software that lets those customers gain insights from historical business data (Kalido) as well as technology that lets users make reports and search queries about disparate data (Noetix). Since, it has added numerous other businesses and services—most recently Lewisville,TX-based Z Option, in December—to augment its overarching goal of analyzing, storing, and helping users get insights from their fragmented sets of data.

The basis of the technology isn’t particularly exciting—in a 2008 profile of Kalido, Xconomy noted the business could be considered “deathly dull” to those with little need for business data modeling. But use cases do show its value for folks looking turn to loads of data into insights that can lead to business improvements.

One longtime customer of Magnitudes is Labatt, the Canadian brewer owned by alcohol giant AB InBev (NYSE: BUD). Labatt, which remains a customer of Magnitude today, began using the service in 2005, years before it joined the beer conglomerate. Kalido built Labatt a new data warehouse to bring together data from 93 transaction systems that held 16 years of records on products, customers, suppliers, employees, and more, Xconomy wrote in 2008. Canada’s providences have differing laws to regulate alcohol sales, so as Labatt acquired smaller breweries, it inherited a variety of reporting and data systems. The issue compounded when Labatt was acquired by a predecessor company of ABInBev and began selling other brands of beer for its parent.

Magnitude’s system helps Labatt manage all those systems and their data, and provides insights to marketing and sales teams, the company says.

Another international retailer, Concord, MA-based Welch’s, began as a customer of Noetix. Welch’s had been trying to upgrade its IT infrastructure in the mid-2000s by adding applications and tools made by companies such as Oracle to get its employees standardized reporting of data and information to help make decisions, Magnitude says in a use case on its website. Noetix’s software (now Magnitude’s) helped Welch employees standardize the creation of reports about internal data from enterprise software applications by Oracle and others, the company says.

Magnitude said it has tripled its revenue, profits, and global footprint in the past three years, according to the news release. The company had 600 customers when it was formed from its pair of predecessors nearly five years ago.

Silverback Enterprise Group, the firm Ney co-founded, has also turned itself into a global software provider. Renamed Upland Software in November 2013, it sells “enterprise work management software,” or applications that help businesses do anything from communicating with customers to managing sales platforms to automating financial and other professional services. Upland (NASDAQ: UPLD) raised $46 million in a 2014 initial public offering. The software business was formed through the acquisition of numerous cloud businesses, according to news reports from that time.

David Holley is Xconomy's national correspondent based in Austin, TX. You can reach him at [email protected] Follow @xconholley

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