A Chat With Steve Woodard, The New CEO At Fresche Solutions
December 16, 2020 Timothy Prickett Morgan
Here is one way you know that the IBM i market is still a good one. Smart people who like to make money, and in fact have to make money for their investors, keep buying up the big players in the software spaces related to the IBM i platform, and they are also successively profiting from those acquisitions and those sales as they create big conglomerates that serve the IBM i community.
So it is American Pacific Group (APG) has become the majority shareholder in Fresche Solutions, which is based in Montreal and which is without question the largest company selling application development and modernization tools in the world. American Pacific was founded by Fraser Preston back in November 2019, who has an interesting background. Preston got a BA in history from Yale back in 1993, a JD in law from Stanford University in 2001 and did double duty at Stanford to get an MBA at the same time. After that, Preston was a reserve officer in the U.S. Navy. (This sounds like the beginning of a promising political career….) Eventually, Preston joined H.I.G. Capital, and rose to senior managing director, driving the acquisition of the Quicken personal finance business from Intuit in May 2015 and quickly followed that up with the acquisition of HelpSystems in August 2015. Preston was chairman of both companies, and in his tenure at H.I.G managed companies with over $2.5 billion in enterprise value, which had about $19 billion in assets under management at the end of his tenure there last year.
There is nothing quite like running your own show, however, and Preston last fall started American Pacific, which is located in San Francisco and already has $450 million of capital lined up to do investments in around ten companies. American Pacific closed a $425 million funding round in February 2020, just ahead of the coronavirus pandemic – excellent timing there – which was well above the $400 million target it set in December 2019 when it opened the funding round. The general partner team at American Pacific also kicked in $25 million to the kitty to start doing acquisitions. American Pacific is pursuing control investment in companies to the tune of $40 million to $50 million and is specifically looking for companies in the United States, Canada, and the United Kingdom that throw off somewhere between $10 million and $20 million in earnings before interest, taxes, depreciation, and amortization. The Fresche Solutions deal obviously makes good use of the experience Preston gained doing the HelpSystems acquisition five years ago and being the company’s chairman.
Fresche itself was formed from several different solution providers back in March 2012, you will recall, and in September 2013, Fresche bought Databorough for code and database modernization, and Fresche then acquired looksoftware in September 2014 to add application development tools. In parallel, Steve Woodard, long familiar to readers of The Four Hundred as chief executive officer of Quadrant Software, got some private equity backing in 2014 for Quadrant, which then acquired BCD Software. And in June 2016, Fresche bought the Quadrant Group to create a very big IBM i tool stack, and followed it up by the raising of $60 million from its own investors in June 2018, which has helped fuel the expansion of Fresche since that time.
In the wake of Fresche buying Quadrant, Woodard stuck around for a bit as chief revenue officer, and then went off to be a CEO again at a network monitoring tool maker called Entuity, and was brought back into the IBM i market by Preston to do some due diligence for the Fresche acquisition for American Pacific. So, it seems to be fate that Woodard would end up being the new president and CEO at Fresche Solutions.
Timothy Prickett Morgan: Whenever I get a bunch of calls from private equity firms about some subset of the IBM i market – sometimes it is high availability, sometimes it is hosting and cloud, sometimes it is modernization – I know something is up. And several months ago I had a bunch of calls to talk about modernization, so I knew something was up. But I didn’t know who or where, since these are always blind calls. Now I know what was up.
Steve Woodard: The deal wasn’t supposed to be at the end of the year. We thought we were going to get it done a little earlier than that, but you know how these things go.
TPM: Only tangentially, but yes. Everything in 2020 takes longer that you think and longer than it ought.
Fresche Solutions has had several serious and ever-larger injections in funding, which led to organic expansion as well as acquisitions. My guess is going from several owners down to one owner simplifies things a bit, and considering that they are also a big equity firm, this is a good way to do more growing both organically and through acquisitions.
Steve Woodard: So, American Pacific Group called me, and the reason I like American Pacific Group is first of all that Fraser Preston, the founding and managing partner, is a top-notch guy. And, as you know, his background was at HIG Capital, and he led the HelpSystems acquisition by HIG and was on the board. He has a pretty good understanding of the IBM i space, and he likes that space – as do I, of course.
TPM: I can take it or leave it, as you know. . . .
Steve Woodard: Yeah, right. [Laughs] You and Alex both. [Laughs again]
TPM: I understate for dramatic effect. . . .
Steve Woodard: Anyway, I was running Entuity, and we sold that in August last year and I stayed on until the end of the year, and I had a couple of things lined up and then COVID-19 hit and everybody said, “I’ll call you in six months.” But American Pacific called me, and Preston was active in the middle of this pandemic, which is great. I like that kind of attitude, and when he asked for my help on due diligence, I did it. And on that point, I want to make it clear that Daniel Crépeau, who was president and CEO before me, was instrumental throughout this whole process, and is leaving on very, very good terms with us. We’re also going to leave the Fresche team intact because the talent capital is irreplaceable.
TPM: I realize Fresche is a private company, so you can’t say much, but what can you tell us about its business. I mean, it is one of the three big conglomerates in the market – HelpSystems and Precisely, formerly Syncsort, being the two others.
Steve Woodard: Looking at Fresche’s numbers it feels amazingly stable. Over the last 8 months, we have seen an incredible rise in project activity with transformation and application services. When I look at the market, I see Fresche and other company’s in our space trying new things and pushing the envelope for example with cloud and containers. Who would have thought of that? I’m excited because I am coming back, but I also realize that we all change in four years and Fresche is a different – and better – company. I am very impressed by what Fresche has accomplished and what they are doing. The investment from APG is going to help accelerate Fresche’s mission to deliver new levels of automation, modernization and transformation to the IBM i community. I’m really excited about that.
TPM: I think you will figure out a way to get an annuity stream out of this. We have continuous development, we have continuous life cycle. We need continuous transformation, and it has to be something where you’re getting sent money in a continuous way to reflect the continuous use of tools and people that IBM i shops need to keep their applications changing and improving.
Steve Woodard: Exactly! But I am not going to say any more about our plans right now.
TPM: Nor do I expect you to.
Steve Woodard: Here is what I can say. Fresche is in a good position to do a lot of things. American Pacific is very, very supportive. They want to do investment. They’ve seen the HelpSystems investment model work. Now, that doesn’t mean that we are going to go buy every company that we can, but I can say that M&A activity will be part of our growth strategy.
TPM: Could you please not do that?
Steve Woodard: We are going to be really strategic about what we do. Next month, we are going to start putting our strategic plan together for the coming year, which starts in April. We are going to be really smart about what we do, and we are going to do it quickly. I think we’re going to surprise some people.
I am really excited to be back at Fresche, back with our clients and back working with the IBM i community. The company has amazing solutions, amazing people, incredible support for our clients and we’re about to take it to a whole new level.
As for American Pacific, I couldn’t ask for a better investor and a better partner. They know the market and bring a tremendous amount of value and industry expertise. The IBM i community can look forward to some really great announcements in the future.
For more details on the transaction, see this statement from Fresche Solutions.