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KANA, Accel-KKR Seal Acquisition

TMCnews Featured Article


December 28, 2009

KANA, Accel-KKR Seal Acquisition

By Brendan B. Read, Senior Contributing Editor


KANA, which makes customer service solutions, will be ending 2009 and starting 2010 with new owners.
 
An affiliate of Accel-KKR, a technology-focused private equity firm, received KANA stockholder approval Wednesday to buy substantially all of KANA’s assets and liabilities for $40.8 million in a deal that has been in the works for the past few months. Accel-KKR is a technology-focused private equity firm with over $1 billion in assets under management. The firm invests primarily in software and IT-enabled businesses.

 
KANA’s current operating business, which includes software, services and licensing will operate as a privately held company under its current KANA brand. In turn KANA’s OTC Bulletin Board-listed entity will be renamed SWK Holdings Corporation and will continue to be publicly traded. SWK Holdings Corporation will hold the net cash proceeds from the transaction and more than $400 million of net operating loss carry-forwards. SWK Holdings Corporation plans to acquire one or more profitable businesses. The publicly traded company will not compete with the privately held KANA.
 
KANA’s Board of Directors had unanimously approved the asset purchase agreement by Accel-KKR Oct.26 and recommended the agreement to the company’s shareholders.
 
“This is a transaction that brings optimal value to our shareholders, our customers and our company,” Michael S. Fields, KANA’s CEO, said. “KANA is pleased that a world-class investor like Accel-KKR has such confidence in the software business of this company. We believe strongly that Accel-KKR’s financial strength and deep domain expertise will be critical to enabling the privately held KANA to extend its current technology leadership to global market leadership in our sector.”
 
The KANA Board of Directors issued the following statement: “With the assistance of the company’s financial advisor, Pagemill Partners, the company conducted a thorough process and received this proposal from Accel-KKR. After extensive negotiations, careful due diligence and in-depth consultation with our financial advisors, the Board has unanimously concluded that this transaction is in the best interests of our stockholders.”
 
KANA smacked a move by its slightly smaller rival Chordiant (News - Alert) to buy it a few days before the stockholder vote on the Accel-KKR offer. It received a letter on Dec. 17 from Chordiant expressed interest in a transaction in which it would acquire all of the outstanding common shares of consisting of cash and Chordiant common stock.
 
“KANA notes that the letter is incomplete, non-binding and highly conditional, including contingencies such as financing, due diligence and the negotiation of a definitive merger agreement,” said the firm in a Dec.18 release. “In particular, the letter does not indicate how Chordiant will finance the cash portion of the transaction and the expenses and ongoing operations of a combined business.
 
“KANA will comply with the terms of the Asset Purchase Agreement that it signed on October 26, 2009, which prohibits it from engaging in discussions in response to an incomplete proposal such as the one provided by Chordiant, and accordingly will not be communicating with Chordiant in response to this letter. “
 
Accel-KKR’s purchase is well-timed. Analysts, observers, and suppliers report increased interest by firms on retaining and extracting more value out of existing customers, and drawing in new ones via word of mouth accelerated by social media, than focusing on acquiring new ones via traditional marketing strategies. The rule of thumb is that it costs five to ten times more to prospect new buyers than to keep existing ones.
 
The bottoming out of the downturn and the slow upswing has reportedly begun to unplug on-hold investments in technologies that demonstrate strong ROI. KANA’s clients report double-digit increases in customer satisfaction, while reducing call volumes by an average of 20 percent. KANA’s solutions have been proven it says in more than 600 companies worldwide, including approximately half of the world's largest 100 firms.
 
KANA is also positioning itself to benefit from the explosive expansion of social media and its rapid morphing into a new customer service channel. In October it announced that it has enhanced the social CRM capabilities of KANA 10, the company’s service experience management, or “SEM,” platform. As part of this enhancement, KANA had entered into an OEM agreement with Baynote. This agreement integrates Baynote’s Collective Intelligence Platform, or “CIP,” with KANA 10 to provide companies with predictive analytics based on the implicit patterns of customers visiting their websites.
 
“Accel-KKR is excited about partnering with KANA’s management and employees to help the company expand its existing position in the global multi-channel customer service market,” Jason Klein, managing director at Accel-KKR, said. “We look forward to investing in KANA and helping the company better serve its customers in industries as diverse as retail, technology, telecommunications, health care, insurance, financial services and the public sector.”

Brendan B. Read is TMCnet’s Senior Contributing Editor. To read more of Brendan’s articles, please visit his columnist page.

Edited by Kelly McGuire







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