Privately held companies have it easy: they can vaguely boast of double-digit growth, record profits, strong cash balances and bright futures even when reality seems to suggest otherwise. At least that seems to be the case with Nashua, N.H.-based Ektron.
The web content management firm, which was consistently ranked one of the fastest growing tech companies in New England in the early 2000s, seems to have come to a stunningly disappointing end.
(UPDATE: Ektron confirmed to CMSWire this afternoon that it closed a second round of equity funding with Accel-KKR, but stopped short of acknowledging a sale.
In a conversation with CMSWire's Virginia Backaitis, Ektron President Tim McKinnon claimed the company is profitable and growing — and contended that rumors of its demise are greatly exaggerated.
In a press release issued mid-afternoon today, McKinnon stated that the Accel-KKR investment "provides strong support for Ektron as it delivers upon its vision and mission to provide solutions to customers," and adding that the company is "well positioned for continued growth in 2015."
Greg Williams, managing director at Accel-KKR and a member of the Ektron board, noted in the statement that the private equity firm has been "more than impressed by the momentum, profitable growth in the business and the results the team at Ektron have been achieving."
The press release contains no comments from — or makes any mention of — Ektron CEO and co-founder Bill Rogers.)
Word Around Town
Several current employees told CMSWire that a minority investor — Accel-KKR, a private equity firm that took an undisclosed stake in the firm earlier this year — is buying out the company for a rumored sum of only $52 million.
Ektron officials reportedly finalized the terms of the deal last week and shared the news with employees Tuesday.
Under the arrangement, an Accel-KKR funded shell company will absorb Ektron's assets. The shell company will subsequently be reborn under the Ektron name, but will start its new incarnation without current CEO and co-founder Bill Rogers. Bill Rogers founded Ektron in 1998 with his brother Ed, who left the company in 2011.
Earlier this year, Ektron closed a growth equity funding round led by Accel-KKR. The company stated at the time that the undisclosed minority investment, the company's first institutional round, would enable it to accelerate product and company expansion.
Now Accel-KKR is reportedly shifting from a minority investor to the only investor. It will own 100 percent of the new company and could also get the lion's share of about $18 million of the sales price, which is designated for preferred stockholders. The remaining $34 million will be distributed among common stockholders, sources said.
Common shareholders have until next week to approve or reject the sale. But the vote is largely symbolic, since the Ektron board of directors retains the right to override it.
Neither Greg Williams, managing director at Accel-KKR and a member of the Ektron board, or Ektron officials have responded to our requests for comment.
(Update: Late today, the following document started making the rounds on the Internet, which outlines the details of the reported sale. If the document is authentic, then it clearly disputes the company's claim that it has only received another round of funding from Accel-KKR.)
Sale or Bankruptcy?
Given the hefty sums tech companies have been fetching lately, some are wondering if Ektron is simply giving itself away. But others argue that Ektron has been in a dizzying free fall the past several years — and just as easily could have ended in bankruptcy court.
One thing is for sure. It didn't play out the way one might have expected, many industry observers concur.
It's hard to determine exactly what happened at Ektron. Ed Rogers, who served as the company's Chief Operating Officer, left Ektron in 2011 to form Akumina, a digital marketing and web solutions company also headquartered in Nashua, N.H. He declined to talk to CMSWire last night.
But some past and present Ektron employees seem to think his absence caused a management gap, which may have ultimately lead to an exodus of top talent.
Word of the sale created mixed emotions in and around Ektron's southern New Hampshire hometown, where outsiders scratched their heads and wondered, "What happened?" and insiders shrugged their shoulders and said, "Told you so."
Chris Crombie, former vice president of sales operations at Ektron, said he was "sad to hear" that Ektron had sold the company for an insignificant amount — actually, for less than half the amount the company was offered In 2008. He continued:
There were so many good people like Ed Rogers, Steve Sherkanowski (former vice president of marketing at Ektron) and David Maffei (former Ektron VP Sales) that helped to build a once thriving company and a recognizable brand. Their departures certainly led to the downfall of a company that had the brightest of futures. This was a sad day for all ex-Ektron employees."
From modest beginnings in 1999, Ektron grew rapidly to generate $42 million in revenues on $49 million of sales by 2010. But a series of what appear to be strategic missteps culminating in the departure of Ed Rogers turned the trajectory of the company from up to down.
Ektron went through massive layoffs in 2012, reducing its workforce from around 300 to just over 100.
So why would a private investment company want to own Ektron? For one, ongoing revenue. The company generates about $12 million annually in recurring maintenance fees from subscribers.
Beyond that, there's the value of the name. Ektron has been battered in the past few years, but it still earns strong ratings from companies like Gartner, Forrester and even Microsoft.