The reverse merger returns Rand Worldwide to the stock market. This deal is about three things: Strength, Liquidity, and Cashing Out.
Rand Worldwide and Avatech Solutions have executed a reverse merger, becoming the largest largest Autodesk reseller and a top-tier reseller for Dassault Systèmes and PTC as a result. The combined revenue of Avatech and Rand from the last twelve months is approximately $82 million.
On a practical level, Rand bought Avatech. But because Avatech was a publicly traded company and Rand was privately held, the deal was structured so the new company will also be public. The newly merged firm will be called Rand Worldwide, Inc., and it will seek a new trading symbol to replace Avatech’s old “AVSO” symbol.
Rand CEO Marc Dulude will be CEO of the new company. Larry Rychlak, formerly president and CFO of Avatech, will be president and chief financial officer. George Davis, former CEO of Avatech, will become a member of the board of directors. Richard Charpie, a managing general partner of Ampersand Ventures, will assume the role of chairman. Ampersand holds approximately 67% of the stock in the new firm.
Dulude was the Ampersand managing partner when it acquired Rand and took it private in 2007, and stayed on as CEO. Before that he was CEO of Moldflow (another former Ampersand holding), and has experience at PTC.
The combined company is Autodesk’s largest global reseller, covering the US, Canada, Singapore, Malaysia, and Australia. All Autodesk-related services and sales in the new company will combine under the IMAGINiT Technologies brand, part of the old Rand. The new Rand will continue sales and support of PTC, Dassault Systèmes, and Autonomy products.
What We Think
This deal is about three things, strength, liquidity, and cashing out.
Strength: In an uncertain economy, resellers are the first to feel the pinch and the last to fully recover. The merged Rand has more cash on hand, more products to sell, more feet on the street, and more opportunity to move into new markets. There was very little territory overlap between the two sales organizations. Now Avatech sales representatives can sell such Rand-developed products as qChecker quality assurance software (a standard at Ford and other top manufacturers).
Liquidity: As a result of the merger, the combined company has approximately 51,400,844 shares of common stock; Avatech had 17 million shares before the merger. It was hard for Avatech to interest institutional investors in its stock, because there was not enough daily trading to insure liquidity (the ability to easily buy and sell). With another 34 million shares, liquidity should no longer be a problem. For now 67% of the new Rand stock is owned by the former stockholders of Rand Worldwide, including its principal stockholders, private equity firm Ampersand. The newly created liquidity achieves the third purpose of this reverse merger, cashing out.
Cashing out: Ampersand bought Rand in 2007. The private equity firm has a history in design engineering software, as a previous owner of Moldflow (acquired by Autodesk) and Eigner, now part of Oracle through the Agile acquisition. Ampersand has a history of active collaboration with its holdings, preparing them for sale to new partners. Instead of issuing new stock for Rand, Ampersand killed two birds with one stone by making the company stronger and putting it on the stock market. Now it can sell out in bits and dribbles instead of looking for someone with deep pockets and strong interest—not very likely for a reseller in this economy.