Veeva explains rationale for moving deeper into services
In November, Veeva revealed it had acquired Physicians World, a company that provides logistics services to businesses that want to put on events. Physicians World services helps these companies by handling tasks, such as the booking of hotels and payment of speakers.
Veeva is exposed to the events management sector through software that handles data on spending and speakers, and connects it to the customer relationship management system.
That exposure led Veeva to partner with Physicians World. Some companies that used Veeva software to manage the data side of events would also task Physicians Service with handling logistics.
Talking to investors on a recent quarterly results conference call, Paul Shawah, SVP of commercial strategy at Veeva, said feedback from customers drove the companies to further tighten their ties.
Shawah said, “We made an acquisition in an area where we saw services being really strategic and a key area for our customers. They were asking us to get into that area and help them.”
Veeva already has a general service business, which generated $54m (€49m) in the third quarter, up 16% year on year, but it is primarily a software company. Earlier acquisitions have typically reflected the fact that Veeva is a software business that provides some services.
The acquisition of Physicians World, a service business, therefore stands out, leading analysts to put questions to Veeva about the rationale for the deal and how it will affect the company’s finances.
Tim Cabral, chief financial officer at Veeva, sees scope for Veeva and Physicians World to do better as part of the same company than they could working independently.
Cabral said, “I think the combined events software business and services business that we now have being delivered from Veeva, there's an opportunity there for margin optimization, both in terms of just normal margin and then add some level of economies of scale.”
Veeva paid around $40m in cash to acquire Physicians World and also granted $15m in retention equity awards. In return, Veeva has gained a business that generates annual revenues just in excess of $20m and is growing in the single digits.
