marchFIRST gets $150 Million Stocking Stuffer

Last week’s announcement by marchFIRST of a strategic relationship with SAP AG (NYSE: SAP) was good news for the troubled eBusiness builder. Yet, what marchFIRST needed more than a partner who could promise new business, was one that could help it fill its $100 million cash hole. A partner who was bold, daring and willing to risk some hard cold cash on a company whose pockets have been emptied by a market downturn.

Well, Santa Claus came early for marchFIRST. Today, it announced that Francisco Partners, a leading private equity firm focused on investments in technology companies, has signed a definitive agreement to invest $150 million in the company in exchange for shares of preferred stock.

Francisco Partners will purchase 63,053 shares of marchFIRST’s Series A 8 percent convertible preferred stock and 86,947 shares of its Series B 12 percent preferred stock for $1,000 per share.

The Series A shares will be convertible at any time into shares of marchFIRST common stock at a price of $2 per share, representing a premium of approximately 41 percent over the five-day average closing price through the date of the agreement.

Upon conversion of these Series A shares, Francisco Partners would own approximately 17 percent of the outstanding shares of common stock, based upon the number currently outstanding.

Yet, when marchFIRST’s stockholders approve of the deal, the Series B shares would convert into Series A shares on a one-for-one basis. Conversion of both the additional Series A shares and the Series A shares issued initially would give Francisco Partners approximately a 32-percent ownership of the outstanding shares of common stock, based upon the number currently outstanding.

Francisco Partners has agreed not to purchase any additional shares of marchFIRST voting stock without the Company’s consent.

“Francisco Partners is a $2.5 billion private equity firm, and its founders are well-established investment and technology professionals. marchFIRST has gained not only an investor, but also a strategic adviser with an expansive partner network and an excellent reputation,” said Robert Bernard, marchFIRST Chairman and Chief Executive Officer. “This relationship provides us with the financial flexibility we sought to execute our global client relationship business model. With this additional financing in place, we can focus on driving operational excellence and leveraging our core capabilities to help our clients get closer to their customers and create operational efficiencies.”

The company expects the transaction to close before the end of 2000. Francisco Partners has committed to provide marchFIRST with $25 million in interim financing pending the closing of the transaction, which is subject to customary conditions and approval under the Hart-Scott-Rodino Antitrust Improvements Act of 1976.

Stockholder approval is not a condition to the closing of the transaction. In conjunction with the closing, Stanton and Neil Garfinkel, also a partner and founder of Francisco Partners, are expected to join marchFIRST’s Board of Directors.

“Despite the recent market gyrations, we believe strongly in the attractive long-term fundamentals of the e-services sector, Garfinkel said. “Our investment in marchFIRST is representative of both our commitment to the sector and our belief in marchFIRST’s position as a leader in that sector.”

marchFIRST will provide additional information regarding the transaction in a Current Report on Form 8-K, which the company expects to file today.

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