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.
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
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.
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
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
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.