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Aprimo gears up for IPO: Acquisitions, internal growth put software firm in position to consider public leap

March 13, 2006

Fast-growing marketing-software-maker Aprimo Inc. is positioning itself for an initial public offering, likely within the next 18 months.

"I think they have big plans in the marketplace," said Kimberly Collins, senior analyst for Stamford, Conn.-based technology research firm Gartner Inc. "Clearly, Aprimo would like to ... file an IPO. I

think they want very much to be the next Unica in the marketplace," referring to a direct rival that went public last August.

Founded in 1998, Indianapolis-based Aprimo makes a software package for the planning, budgeting and coordination of a company's marketing activities.

Aprimo won't say outright whether it's ramping up for an IPO. But the company's chief marketing officer, Michael Emerson, gave a very strong hint.

"It certainly would be something that as prudent business people we would consider," he said. "If you research the venture capitalists who invested in our company, they've had good success taking companies public. You can draw your conclusions from that."

An Aprimo IPO would provide a huge lift to Indiana's aspiring information technology sector. The state now has just two publicly traded software firms, Indianapolis-based Interactive Intelligence and CTI Group.

Aprimo has been posting the kind of rapid growth that would entice IPO investors. A year ago, it had 120 employees. Today, it has 220, about half of them in Indianapolis. Aprimo won't disclose annual revenue, but Emerson said it was 50 percent higher in 2005 than a year earlier.

The company's growth has been fueled by a blend of internal expansion and acquisition of competitors. In March 2005, Aprimo paid $16.5 million to buy the marketing software assets of a one-time rival, the SmartPath unit of New York-based DoubleClick Inc.

Documents filed with the Securities and Exchange Commission show that Aprimo in December completed efforts to raise $14.5 million from a syndicate of venture capital firms. Some of that money went toward paying off debt, but part flowed into company coffers to fund growth, Emerson said.

"It leaves cash available for other opportunistic moves going forward," Emerson said. In the short term, he said, those moves would more likely involve internal growth and product upgrades than acquisitions.

Aprimo rival Unica has posted solid performance since going public last fall. The Waltham, Mass.-based firm raised $48 million selling shares at $10 apiece. The shares were trading late last week for $11.70.

The 14-year-old company posted revenue in its most recent fiscal year of $63 million, which analyst Collins believes makes it about twice the size of Aprimo.

Collins describes Aprimo as a technical leader in the marketing software area, with superior niche software and a large, broad customer base. But unless it continues to reinvest and broaden its software offerings, she said, Aprimo's leadership position could quickly evaporate.

"They probably are the two companies that will battle it out," Collins said. "I think there's a lot of pressure on Aprimo, because Unica got to file the IPO first."

Yet Unica's move also could benefit Aprimo, she said. The Massachusetts company already has demonstrated there's a place for a marketing software maker on Wall Street.

Emerson agreed. "If our growth continues and our success continues over the next one to two years, [an IPO is] certainly a possible outcome for us."

But Collins thinks a public offering could come even sooner. Aprimo will probably file for its own IPO by year-end, she said, or perhaps the early days of 2007. Until then, Aprimo will spend its time laying groundwork, hiring an investment bank and building its case to potential investors. It took Unica nearly a year to stage its own IPO, she said.

"This is not like a rubber-stamp IPO like we saw in the dot-com days," Collins said. "There's a lot of due diligence that goes along with it."

Investors are likely to be intrigued by Aprimo's story. Collins notes that the marketing software area is one of the fastestgrowing in the industry. It's expected to be a $1 billion annual market by 2010, growing by up to 12 percent annually.

While Aprimo explores the path to Wall Street, the company's managers also will have their hands full continuing to manage their growing business. Aprimo recently revealed plans to move from its 14,000-square-foot offices at 96th Street and College Avenue into 42,400-square-feet in Duke Realty's new Nine Parkwood building.

Mark Koulogeorge, managing director of Chicago-based MK Capital, was one of the first venture capitalists to invest in Aprimo. He said Aprimo isn't focusing on an IPO, but rather on continuing rapid growth.

"I can say we don't need to do an IPO. We don't need to raise financing. We're just going about our business. At the appropriate time that issue is going to take care of itself," Koulogeorge said.

"What I'm hoping to prove at Aprimo is you can build a world-class technology company from scratch here in the Midwest," he continued. "This management team and group of employees has outcompeted literally dozens of other companies that were principally founded in Boston and Silicon Valley. I know I and a large number of the managers take a large amount of pride in that."
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