Carving Out Growth
How Lumine Group Acquires and Scales Software Businesses
This report will cover the following topics:
Introduction to Lumine Group Inc.
Mechanics of the Spinout Transaction.
Purchase Price Analysis of WideOrbit.
Consolidated Capitalization After the Acquisition.
Skin in the Game: Aligning Incentives at Lumine.
Organic Growth Drivers & Cash Profitability.
Acquisitions & Reinvestment Potential.
Valuation Model, Drivers & Risks.
Introduction to Lumine Group Inc.
Lumine Group Inc. (Lumine) is a strategic acquirer and developer of Vertical Market Software (VMS) businesses within the global Communications and Media industry. Their core mission lies in identifying and acquiring high-potential VMS companies with a focus on the specific needs of customers in various Communications and Media segments. Lumine fosters a collaborative environment with a talented team of over 3,500 individuals worldwide. The team members bring a diverse range of skills and perspectives, with a strong presence in North America (33%), Europe (excluding UK: 27%), Asia Pacific (23%), and the UK (9%). The remaining 8% are distributed across other regions globally.
Lumine Group Inc. was originally its own vertical that was part of the Volaris Operating Group owned by Constellation Software until it was uniquely branded “Lumine” in 2020 by Volaris and applied the unique decentralized culture learnt under Constellation.
The company is led by CEO David Nyland. David began his career as a software developer at a Tier 1 systems integrator and quickly moved into entrepreneurial roles at two telecommunications software start-ups, which scaled and were sold to strategic acquirers. David joined Volaris in 2014 to build a communications vertical. Since 2014, they have built a portfolio of 28 companies, acquiring at a rate of 2 to 3 acquisitions per year with an average cost of roughly $11.7 million before the acquisition of WideOrbit.
On average, these businesses operated for 21 years before joining Lumine, bringing a wealth of experience and established customer relationships that primarily serve enterprise customers.
The software and services offered by these business units (BUs) are often mission-critical, meaning they are essential for a customer's daily operations. Since these solutions represent a relatively small portion of a customer's overall budget, switching providers becomes a less attractive option. The potential disruption and risk associated with changing such crucial software further strengthens customer loyalty.
The end markets Lumine serves are themselves essential – internet and mobile phone connectivity are no longer luxuries but necessities. This underlying demand suggests that economic fluctuations will likely have minimal impact on the products and services offered by Lumine's BUs.