Coveo to resume acquisition strategy following IPO, CEO says

Breaking News 23 August

Coveo to resume acquisition strategy following IPO, CEO says

by Mark Coakley

Coveo [TSX:CVO], a Quebec City-based provider of artificial intelligence (AI)-powered search and recommendation tools, is resuming its acquisition strategy after an almost two-year pause following its 2021 initial public offering (IPO), said CEO Louis Tetu.

It is looking for tuck-in acquisitions related to large language models, generative AI and adjacent technology, he said. The company is also scouting for targets that could assist its move into new verticals such as financial services, pharma, and energy, he added.

Coveo would consider targets ranging in price from USD 10m to USD 1bn, Tetu said. Targets should be based in Europe, Asia-Pacific, and North America, he added.

The company has USD 200m on its balance sheet, largely from its IPO, as well as a USD 55m credit facility, he noted. 

It welcomes approaches from “banks" and "companies,” the CEO said, noting that Coveo will handle most of its search for targets in-house, under the leadership of Chief Corporate Development Officer Nicholas Goode.

Tetu declined to say if Coveo is currently in talks with potential targets.

In 2020, Tetu told Mergermarket that Coveo had 200 targets in its acquisition pipeline. Its last acquisition, however, was in late 2021, when it acquired London-based e-commerce technology company Qubit. The lack of additional buys was mainly due to Coveo’s preparation for its IPO, COVID-19, a general decline in the software-as-service (SaaS) market, and lofty valuations of private equity-backed companies, the executive said for this report.

The SaaS market has since rebounded and valuations have declined amid a plunge in PE funding, making acquisitions an attractive strategy again, he noted.

More than 80% of Coveo's revenue is generated in North America, he said. Its clients include Zoom, Dell, Salesforce, Thomson Reuters, Informatica, Xero, Adobe and SAP.

Its competitors includes Amsterdam-based ElasticN.V. [NYSE:ELST] and internet search engines, he said.

Coveo works with the Canadian law firm Norton Rose and the US law firm Wilson Sonsini. Its auditor is PwC.

The company has a market cap of USD 1.1bn. Its share price closed at CAD 10.99 (USD 8.11), 79.3% higher than a year ago. It raised CAD 247.4m from its IPO.

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