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StarCite has engaged a third-party firm to assist in exploring financial options, a process that could result in additional investment or the sale of the meetings technology company, CEO Greg Dukat confirmed to The Beat. The confirmation follows two years of declining revenues for StarCite, which remains unprofitable.
The company currently is owned by several investment firms, including Internet Capital Group, TPG Growth, Norwest Venture Partners and TL Ventures.
Dukat, who in 2008 joined StarCite as CEO, stressed that the goal of the process was not to sell StarCite, but to explore additional financing options, including finding new investors. "We are very pleased with the level of interest we've received, and given that, early indications are that this will be a very positive process for us, but it is much more about finding a strategic partner and not just selling the business," he said. "If we just wanted to do that we could have done that many times over the three years I've been running the company."
Dukat said the decision to engage in the process was made a few years ago, during the economic downturn, but shelved until StarCite's finances improved. It was prompted by a search for "organic and inorganic growth," he said.
Existing StarCite investors "have some limitations in their funds relative to where they are to invest potentially more in the business," Dukat said. "It doesn't mean it will happen for sure, but we have facilitated some advisement around looking at additional partnerships with additional investors that could enable us to fulfill a strategy that's much broader than anyone in the marketplace, that will elevate StarCite to a huge player in this segment." Sources identified the advising investment firm as ArchPoint Partners of San Francisco.
"We felt like the timing is right for current investors to reinvest or exit and better monetize their original investment," Dukat said, "and the timing is right for third parties to be more interested in our business."
StarCite in 2010 posted an operating loss of about $3.8 million, smaller than the $6.2 million and $18.4 million it recorded in 2009 and 2008, respectively, according to a March filing with the U.S. Securities and Exchange Commission by publicly held Internet Capital Group (which owns 36 percent of StarCite, according to a SEC filing posted last week).
However, revenues have declined as well, to $44.7 million last year from $50.6 million in 2008. Dukat cited the economic recession, which "we felt a bit more than our main competitors, because most of our customers are large and cut meetings in a much broader and more significant way."
"Our top line is down a bit, but we were engaged in several lines of business that added to the revenue line but weren't profitable," Dukat explained. "We shed operations that were less profitable. We did credit card processing for customers. We were big into destination management and solutions--which is still part of our offering, but not as large as it was. That took expense out of our business and helped us improve the bottom line."
Dukat pointed to other indicators that he said show StarCite's more stable financial footing. "If this is an issue about the health of the company especially from a competitive standpoint, the time would have been two or three years ago," he said. In late 2008, candidly, the company was really struggling from a bottom-line perspective. We've improved that dramatically. We had very little cash and no line of credit; today, we have a nice cash balance and a nice line of credit. The company is very healthy. Customer retention is strong." The firm this month introduced a new technology platformand last week announced a 68 percent year-over-year jump in first-quarter room night volume booked through its systems.
StarCite was formed in 1999 and has been a prominent player in the corporate meetings technology segment. The company is no stranger to M&A; years ago it played a key role in consolidating a once-oversupplied market through acquisitions of and mergers with such competitors as B-there.comand OnVantage.
Today, StarCite's competitive set includes Cvent, SignUp4 and Certain Software. Whether StarCite's current exploration leads to its own sale remains to be seen, but Dukat acknowledged the possibility.
"Every company is for sale at a price," he said. "Sabre was bought by a private equity firm, and they are still in their core business, but that private equity firm is enabling them to do different things. What we're trying to accomplish and the time we're spending on this is more likely to [lead to] new investment or stay as we are and potentially revisit it another time than it [would lead to] us looking to sell the business. That's not really the reason we entered this process."
The article originally was published in The Beat.
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