Bentley’s Strong IPO Signals More Construction Tech Exits Coming

The news that Bentley Systems has gone public on the NASDAQ signals strong interest in construction tech companies serving the Buildings and Infrastructure market and almost certainly will lead to more such infrastructure technology exits in the months to come. According to a September 23rd article by Seeking Alpha, Bentley shareholders raised $236 million in proceeds from the sale in a move valuing the company at just over $7 billion by the end of trading.  The article suggests that the price may be high. However, profitable and with a top line of more than $700 million, the valuation is not necessarily inconsistent with a hot market for technology companies, particularly when a very small portion of the company was offered.

As we noted in our second quarter venture report, PROCORE had been set to go public but opted to raise money privately instead.  Bentley’s strong reception would seem to suggest that PROCORE will again be coming to the IPO market in the months to come.

A strong IPO Market Bodes Well for Smaller Construction Tech Exits

In addition to the general investor interest strong IPO’s generate in the sector, as investors look to see who may be next, a strong market for IPO’s bodes well for smaller players on several fronts:

• Companies often bulk up with smaller acquisitions prior to IPOs.   Bentley Systems, for example, recently acquired NoteVault in the project management space and Synchro in the Schedule management sector (See earlier briefing – Bentley’s NoteVault Acquisition Speaks to New Front in War For Project Management Supremacy.)
• A hot IPO market gives investors in earlier stage companies a way to think about their own exits.
• Big tech has been a primary buyer of little tech. Beyond Bentley’s recent acquisitions, companies like Autodesk, Trimble, and ORACLE have all notched significant acquisitions and investments in the sector over the past few years. For more on that, click the image below to access our 2019 M&A Report, and look for an update later this year.

And there are still plenty of targets out there.  Across several of our “Top Lists,” we have catalogued players in:

• Infrastructure 50
• Pre-Construction 50
• Project Management 50
• Smart Job Sites 50

What’s Next For Bentley?

So, what is in store for Bentley now?  We certainly hope to have the opportunity to hear directly from them in coming months. Meantime, it is not immediately clear from the IPO announcement, itself. Unlike other funding rounds or IPOs, money raised in this offering seems to have gone to pay out existing share holders. So, the capital would not appear to be available to be used for new acquisitions or a product roadmap.  However, it would not be out of the norm for Bentley to come back with another offering, based on its current success. Also, Bentley actually has profits which it can certainly use to fuel expansion. They also have previously received investment from Siemens . In 2018, Siemens added to its investment in Bentley.  In summary, it would appear they have a number of routes to access capital to invest in added capabilities in the coming months.

Wherever Bentley goes next, it does appear that it has significant room for further expansion. Based on our recent benchmarking surveys of our engineering and construction members (click on the report image to access the full report), Bentley did not rank as a “number one most used” solution in any of the eighteen solution areas we surveyed and only ranked among the top solutions in one area. It is a crowded field with plenty of strong players, and our survey population was admittedly small relative to the whole market and includes more building contractors than infrastructure engineers and contractors where Bentley may have more historic strength. Regardless, as the lists above illustrate, there are also plenty of smaller tech players out there too, with well established niches that Bentley could grab to gain ground, quickly. Bentley has been serving the market for much longer than most of the others, and has a diverse business beyond infrastructure and buildings engineering and construction, too. So, we’ll have to wait to see where they go from here.

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