RuleBurst

In November 2004, Kevin Chin led a consortium that privatised SoftLaw Corporation Limited (later renamed RuleBurst) from being listed on the Australian Securities Exchange at an enterprise value of A$12m.

At the time, following the spectacular blowup of the Dot-Com bubble in 2001, software was the most unpopular sector on the stock market. The Canberra-headquartered SoftLaw had floated on the ASX in 2000 and was a classic tech boom baby. By 2004, however, its share price was languishing at all-time lows and our due diligence indicated it had only six weeks of cash to survive. Yet the core middleware, which was a business rules engine (BRE) focussed on natural language inferencing (an early form of what is now called artificial intelligence), was a strong product ranked on Gartner’s Magic Quadrant. Furthermore, Australian government departments were already purchasing RuleBurst’s enterprise software solution, and the company had revenues, albeit declining.

Kevin saw the opportunity to really change the modus operandi in order to save the company and scale it up not only in Australia but also globally. Following the complex and difficult process of privatising a business with two classes of equity securities listed on the ASX, in late 2004, Kevin became the joint-largest shareholder and the hands-on Chief Financial and Operating Officer (CFOO) of the business, working closely with the newly appointed CEO, who had been promoted from within the ranks.

The first nine months was a salvage and rescue operation to save the business from demise. This was an extremely challenging period with many difficult decisions executed by the CEO and CFOO, including letting go more than 50% of the staff base and cutting unprofitable customers.

By July 2005, however, the business was safe and had in fact built up a small cash war chest. The UK and US satellite offices were beefed up to be full-fledged outfits with resident team members, and the company was renamed RuleBurst Corporation. To complement its BRE capability, in late 2005, the business undertook a small bolt-on acquisition in Australia in the GRC (governance, risk, and compliance) software space. During the 2005 and 2006 financial years, the business grew revenues at 100% per annum, with strong profitability, reflecting the changes that had been made to culture and sales architecture as well as a leaner cost base. Importantly, RuleBurst secured several new marquee customers in both the UK and US markets.

In July 2006, the business showed classic growing pains and over the ensuing nine months, people, systems, and processes broke down. RuleBurst’s business consequently plateaued and was unable to grow revenues in the 2007 financial year. To overcome this problem, a change of leadership, upgrades to IT, accounting and ERP systems, and the introduction of new systems and processes were implemented. Additionally, and crucially, a cultural reboot was instigated with more urgency instilled into the sales team in particular.

By the middle of 2007, the business was back on track and secured more marquee customers in North America and opened an office in Singapore to target Asian customers. In Australia, the company made the very small bolt-on acquisition of financial crime specialist FraudSight, to expand its product platform.

An opportunity also emerged in late 2007 to acquire a distressed North American peer, Haley Corporation. The new CEO led a deal that proved to be a strategic game changer for the company, cementing the strong presence and stature of RuleBurst in the North American market. The name of the company was thus changed to RuleBurst Haley.

In June 2008, RuleBurst Haley agreed to be acquired by Oracle Corporation Limited, with deferred settlement in November 2008. Being in the eye of the global financial crisis (GFC) storm, this was a very difficult time to close a transaction, but the Chairman, Board, and leadership team were persistent, and a deal was finally consummated at an enterprise value of A$150m. This was an incredible result to deliver to investors only six weeks after the demise of Lehman Brothers and when, on a daily basis, the world fretted over whether the global financial system would melt down.

In the space of four years, the company was transformed from being an Australian-centred business on its deathbed to being a successful global software company with operations in Australia, the UK, Europe, Asia, and North America. Value was created primarily from operational engineering and re-engineering, including of the sale architecture. The sale to Oracle delivered a 13.8x multiple of invested capital and a 93% IRR to the original ordinary share investors.