Private equity-backed Quorum Software, a digital solutions provider for the energy sector, is strengthening its portfolio of finance, operations and accounting software with the acquisition of Houston-based Coastal Flow Measurement Inc.

Coastal Flow, which has served the oil and gas industry for about five decades, offers gas and liquids measurement services along with analytics and software resources.

The acquisition announced Feb. 26 comprises all of Coastal Flow’s family of companies, including subsidiary Flow-Cal Inc., a Quorum competitor that offers software that gathers, validates, stores and distributes a company’s energy data. The deal, for which the value was not disclosed, brings together two companies that often serve the same clients ranging from smaller independents to larger majors.

The news comes as the oil and gas industry moves deeper into its digital transformation, looking to add value from digital technologies.

“What we’re most excited about is taking our current product, their measurement application, our financial and operational capabilities, and integrating them tighter,” Quorum Software CEO Gene Austin told Hart Energy, pointing out shared customers, data and the companies’ varying applications. “I think the opportunity is to tighten that integration so that people can see into what type of data is being collected, how it’s being validated, understanding the history, while at the same time understanding how that data drives financial outcomes on the revenue and cost side.”

Coastal Flow’s companies also provide services to the downstream sector.

The acquisition, expected to close the second week of March, bolsters the company’s presence in the upstream and midstream markets while allowing for the end-to-end integration of data capturing and measuring it the right way, Austin added.

“As the energy industry continues to develop the digital oilfield, our employees and customers will recognize the benefits of a Quorum and Coastal Flow combination to effectively deliver an integrated and comprehensive business process automation solution,” Mark Fillman, president and board member for Coastal Flow, said in a statement.

Austin told Hart Energy that Coastal Flow had been exploring options.

“When we stepped back and looked at our applications in measurement called PGAS, we felt like the ability to enhance our measurement story by bringing Flow-Cal in was significant in that it was worth the opportunity to acquire them,” he said. “You never know when these types of opportunities are going to pop up.”

He added that about 60% of Coastal Flow Measurement’s revenue comes from its software business, with the remainder from its measurement teams.

“We’re very excited about what the Flow-Cal application, in particular, can do to our overall value proposition as we look at both of upstream and midstream organizations,” Austin said.  “Obviously, the measurement applications are vital to providing accurate data to both our exploration and midstream organizations and that data feeds our financial, accounting and operational applications.”

The acquisition also exposes Flow-Cal, which has mainly focused on the midstream gas market, to the upstream segment. This creates “an opportunity to drive a lot more revenue and certainly customer acquisition,” Austin said, adding it also strengthens Quorum’s upstream offerings. “We have now a larger lineup of solutions for our upstream customers.”

Tyson Greer, executive vice president and chief product and technology officer for Quorum, added Quorum and Flow-Cal provide “key mission critical systems used by the largest transporters and or processors of natural gas and natural gas liquids in the U.S. and Canada.” Having shared many key accounts, the companies have worked on joint integration from a measurement and operational standpoint.

“The ability to take that even deeper in that vertical market and the ability to do the same thing on the upstream” are key rationales for the acquisition, Greer told Hart.

The deal was made amid continued A&D activity in the oil and gas industry post-market downturn. Asked whether Quorum plans to make more acquisitions this year, Austin said the company is always open to opportunities to add value to its product and services mix.

“It’s fairly rare for a CEO to be onboard less than three months and make an acquisition, so I would say that’s a sign of definite interest in finding really good quality organizations to join us,” said Austin, who was named to lead the company in December 2018.

A software veteran who has served as CEO for companies such as Bazaarvoice and Convio, Austin is looking at how the market and technology are evolving and how the company can further drive innovative thinking from a digital transformation standpoint and take advantage of digital technologies available.

“The digital transformation is taking place in so many industries but it’s still very early in the energy sector,” Austin said. “I think I bring that expertise that allows us to really step back and think about how our applications can combine with digital technologies and things like AI [artificial intelligence] to provide additional value to our customers.”

Credit Suisse Securities (USA) LLC and Macquarie Capital served as financial advisers to Quorum, while PPHB Securities LP served as financial adviser to Coastal Flow, according to the news release. Kirkland & Ellis LLP served as its legal adviser for Quorum, and Locke Lord LLP served as legal adviser for Coastal Flow. Credit Suisse, Macquarie Capital, PSP Investments Credit USA LLC and Angel Island Capital provided financing for the transaction.

Quorum Software is a Thoma Bravo portfolio company.

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