ProfitPoint invites M&A candidates, moves corporate flag to Pennsylvania

Milt Capps UPDATED 4:38 PM

Published October 28, 2008

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Vaden Landers

Five years ago, when the two co-founders created ProfitPoint Inc., neither the Tennessean nor the Pennsylvanian wanted to move to the other's homestate. Since then, CEO Vaden Landers has operated from Franklin, and President Jim Battista from suburban Philadelphia.

During an interview with VNC here yesterday, Landers and Battista confirmed that ProfitPoint recently changed its headquarters domecile to Pennsylvania, rather than Tennessee, a decision driven in part by an opportunity to qualify for workforce-development and economic-development incentives there.

ProfitPoint provides gift and loyalty cards for "non-cash" transactions at point-of-sale, as well as credit-card transaction processing, merchant cash advances and other services.

While moving the company's flag to the Philadelphia area might be seen as largely symbolic, it could also foreshadow a further drawdown of the company's presence in Middle Tennessee.

ProfitPoint resources have long been more concentrated in the Philadelphia area. Now, the company's leasing of 25,000 sq. ft. of office space in the Philadelphia suburb of Clinton Heights suggests that even ProfitPoint's 13-person customer care and call center here in Franklin may eventually move north.

Landers confirmed the ProfitPoint board of directors has been considering moving the Franklin call center, but no decision has been taken, yet. He said the company has more than two years left on its lease of 3,000 sq. ft. here in Franklin.

Come what may, Landers said, he has no plans to leave Nashville, given that he can pursue strategic acquisitions for ProfitPoint, from any city.

Landers emphasized, "We're buying," when asked whether the firm is sufficiently capitalized for mergers and acquisitions, later adding that the sector's current M&A environment is a virtual "land-grab."

The company's Series C round closed in March 2007, having been funded by Clayton Associates, based in Franklin; and, New Spring Ventures of Radnor, Pa. Landers said that in 2009 the company may seek more capital, using debt or equity strategies, in order to fuel sustained M&A activity.

As evidence of his desire for more roll-up acquisitions, Landers said the company will place an ad in The Green Sheet, an industry publication, declaring ProfitPoint's interest in talking with would-be sellers. He said acquisition targets might include competitors, or niche providers of point-of-sale software and systems that would integrate well with ProfitPoint infrastructure.

Both Landers, 39, and Battista, 49, declined to provide ProfitPoint's revenue. However, in August 2007, Landers announced that ProfitPoint was buying a then-undisclosed competitor, in a transaction he estimated would increase ProfitPoint's annual revenue to $10 million and raise to more than 20,000 the number of sites served. In March of this year, ProfitPoint announced it had closed its acquisition of New Market Services (NMS) based in the Cleveland, Ohio, area.

In August, Inc. Magazine ranked ProfitPoint No. 59 on its annual ranking of the 5,000 fastest-growing private services companies in the nation, with three-year sales growth of 2,642.0 percent, during 2004-07. Landers said yesterday that during the same period the company [produced about 50 million cards, and is currently adding about 15 million cards to that tally, per year].

Yesterday, Battista (left) indicated the company is meeting or exceeding its targets, but he declined to provide details. Asked where ProfitPoint stands on profitability, Battista explained the company is currently giving higher priority to expanding its market share, through organic sales-led growth and acquisitions, resulting in greater short-term sales and customer-integration costs.

Long before the company's charter was moved to Clifton Heights, about 80 of ProfitPoint's sales and administrative employees were working there. In addition to the call center here in Franklin, another dozen or so employees work remotely in other states, bringing total employment to 108, up from 30 people, just a year ago. Only three hires resulted from the NMS acquisition.

Four years ago, the sale of a portion of ProfitPoint to Brentwood-based Comdata had raised hope in some quarters that ProfitPoint's footprint might expand in Middle Tennessee. Today, however, Comdata retains a small share of ProfitPoint, [much less than the 17.5] percent Comdata originally purchased. Former Comdata CEO Gary Krow, who had helped push the relationship with ProfitPoint, was forced out of the company after a spat with parent Ceridian Corp.'s top management, which was fending-off dissident shareholders who were apparently aligned with Krow. This past summer, Krow as named CEO of Omaha-based GiftCertificates.com.

One of ProfitPoint's key competitors, Valutec Card Solutions, is based in Franklin. Nearly two years ago, Valutec was bought by Metavante Corporation, the financial technology subsidiary of Marshall & Ilsley Corporation (NYSE: MI), the same Milwaukee-based company that bought Nashville-based Link2Gov in 2005. ♦