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PurchasePro Acquires Stratton Warren

Written By: Steve McVey
Published On: December 4 2000

PurchasePro Acquires Stratton Warren
S. McVey - December 4, 2000

Event Summary

PurchasePro recently announced it would acquire Stratton Warren, Inc., a provider of inventory management and purchasing solutions for hospitality related industries. Stratton Warren's customer base is composed of more than 50,000 suppliers that together purchase more than $5 billion each year. Vertical markets represented by the suppliers include government, foodservice, entertainment, resorts, amusement parks and hospitality. Among the more recognizable suppliers are Opryland, Fort Jackson Army Base, Snowbird Ski and Summer Resort, MGM Mirage, The Broadmoor, Delaware Park Race Track, The Greenbrier, Harrah's Entertainment Inc., Mandalay Bay Group Resort, Park Place Entertainment, Pinehurst Resort and Country Club and Vail Ski Resorts.

PurchasePro will make Stratton Warren's solution available to its tens of thousands of members in the company's global marketplace solution for buyside/sellside e-commerce solution. "The acquisition of Stratton Warren enables PurchasePro to incorporate best of breed inventory management and purchasing solutions into our e-commerce products," said Geoff Layne, executive vice president of PurchasePro.

PurchasePro will pay less than $15 million in stock and cash and expects Stratton Warren's financial results to be accretive, excluding non-cash charges. The two parties expect to complete the acquisition by the end of the year subject to customary conditions.

Market Impact

PurchasePro made a sound decision in acquiring Stratton Warren. First, Stratton brings PurchasePro the potential to add thousands of new customers from among its 50,000-strong supplier base. These suppliers will contribute to PurchasePro's recurring revenues through subscription or transaction-based fees charged for their participation. Second, compared to the potential increase in revenue it brings, Stratton is a bargain at $15 million. Even if no more than 40% of Stratton's suppliers elect to stay with PurchasePro, the company stands to receive between $7 and million to $14 million in additional revenue per year (assuming 30 transactions per month per supplier at $10-20 per transaction). Third, in managing the integration of its products, PurchasePro is able to capitalize on a working relationship and common industry focus with Stratton that extends back to 1997. In fact, PurchasePro began as an online marketplace for large hotels, casinos, and restaurants and these companies make up a significant portion of Stratton's customer base.

Together, PurchasePro and Stratton Warren gain more ground against competitors, in particular GoCo-op.com (see TEC article, Does Someone You Never Ever Heard Of Hold The Keys To The E-Commerce Kingdom?). Both rivals offer digital marketplace platforms including software, services and catalogs for hospitality related verticals. In contrast to Stratton, GoCo-op's supplier base is composed primarily of large hotel chains like Marriott International, Inc. and Hyatt Corporation. The additional hospitality verticals that PurchasePro gains through Stratton give it considerable edge over GoCo-op, which itself would have benefited from a merger with Stratton.

User Recommendations

Users in the hospitality industries who may have been considering PurchasePro as a solution for Internet-based B2B procurement should be encouraged by the announced merger with Stratton Warren. The combined companies stand a better chance of surviving against larger vendors like Commerce One and Ariba and can offer a greater selection of suppliers and features to its customers.

 
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