FrontRange Solutions Inc. today issued a rather surprising announcement that Francisco Partners, self-described as "one of the world's largest technology-focused private equity funds," (and it's not hard to believe in light of Francisco Partner's $2.5 billion worth of committed capital) has entered an agreement to acquire all of FrontRange's outstanding shares in a transaction valued at approximately $200M.

FrontRange CEO Michael McCloskey initiated the announcement by stating that "FrontRange Solutions has out-performed the industry for the last two years, growing at a rate that far exceeds our competition. During this period, we have invested heavily in both R&D and sales expansion, while continuing to increase our profitability. With several new products coming to market, we are well-positioned for continued growth, and plan to increase our market share."

CEO Michael McCloskey is noted in the industry for taking several high tech firms into their IPOs (Kana Communications, Genesys Telecom and Network Appliance), which makes this privatization move somewhat (though not altogether) mysterious.

Neil Garfinkel, a Managing Director of Francisco Partners, added, “We are pleased to become an investor in FrontRange and look forward to working with Michael and the rest of the management team in the coming years. FrontRange has a strong market position, great product franchises that are being improved by advanced technology, over 140,000 customers, and a global partner channel that provides broad market coverage. We believe the company is poised to deliver significant growth over the next several years.”

McCloskey also stated, “This investment by Francisco Partners will enable FrontRange Solutions to continue to pursue our aggressive growth strategy. We are committed to providing our customers and partners with market leading products and superior service and support. This investment further strengthens that commitment."

Clearly, FrontRange and Francisco Partners are banking on making a very big splash in the mid-tier CRM arena, a market which by some estimates (and they vary quite a bit) can be valued somewhere around the $15 billion mark, depending on which analyst group you pray to, over the next few years. The large-sized enterprise market for CRM is frequently considered to be still in recovery mode from (to put it mildly) erroneous CRM purchases and implementations in the late 1990s and the early part of this decade. Small to medium-sized businesses (SMBs) have expressed strong interest in CRM now that it's attainable to them: hosted delivery and customizable solutions have gone a long way in helping bring this accessibility around. While there are many more SMBs in the U.S. (and worldwide) than large enterprises, SMBs have traditionally been limited by a lack of IT resources, something the hosted delivery model is tailor-made to overcome.

Ease of integration is another key to success in CRM for mid-tier companies. Any CRM solutions provider that can provide a full-featured and customizable product that is easily integrated and administered is likely to score a big hit. Clearly, FrontRange is planning on being that company. Additionally, they have thus far demonstrated that they understand the value of being a b-to-b solutions provider that understands the vertical markets it serves, to the point of planning vertical-market-specific versions of some of its products.

A quote in the release from Yankee Group analyst Sheryl Kingstone mentioned the word "potential acquisitions" in a future text context, leaving the industry to believe that "aggressive growth" is planned with the help of Francisco Partners' significant resources by not only organic growth but also via mergers.

Obviously, though, CRM is not the only enterprise business category FrontRange operates in. The company's product families, designed specifically for small-to-medium-sized enterprises and distributed enterprise organizations, include its GoldMine solution for business relationship management, contact management and sales force automation; its IT Service Management with HEAT and ITIL standards-based modules for service management; Communication Management including IP Contact Center for reduced telephony costs and integrated contact center operations; and Infrastructure Management, which provides the ability to optimize the full lifecycle of a company's assets.

The transaction is expected to close in approximately 90 days, and is subject to approval by FrontRange shareholders and customary closing conditions.

Pending a talk with company management, I hope to have more in-depth info on the transaction very soon.

Tracey Schelmetic is editorial director for CUSTOMER INTER@CTION Solutions. For more articles by Tracey Schelmetic, please visit:

http://www.tmcnet.com/tmcnet/columnists/columnist