sacbee Inside Business: Synergex steps on the gas with a plan for growth: Branching out by acquisition

Dave Dixon, vice president, and Michelle Wong, president of Synergex, log on to the company computer system. Having embraced an aggressive growth strategy, the software firm is trying to raise $6 million in a private stock offering.
Bee/Michael A. Jones

Synergex steps on the gas with a plan for growth: Branching out by acquisition

For more than two decades, Synergex International followed a steady growth path.

Today, its line of Synergy software products are used at 200,000 sites by 2.5 million people in every state and 79 other countries. And it boasts an impressive list of customers, including the Walt Disney Co., Toyota, Rolls-Royce, the Australian Museum Society, Mellon Bank and Xerox Corp.

"We spent a long time developing a good, solid software company," said Michele Wong, president and chief executive officer of the Gold River firm. "We're generating a solid revenue base."

But in the next few years, Synergex plans to run on a fast track, following an ambitious strategy that could boost revenues four-fold by the turn of the century.

"If we're ever going to do it, this is the right time. We're willing to walk on a limb a little bit," Wong said.

The strategy is to branch out into new fields by acquiring other software companies.

Synergex projects sales to more than double from $10.5 million in 1998 to $26 million by the end of next year. Sales are projected to surge to $40 million by 2000 with future acquisitions.

To help fund this growth, Synergex is negotiating with investors to raise $6 million in a private offering.

Synergex, which has 100 employees, produces software development tools used by programmers to write software applications for banks, manufacturers, hotels and other businesses to handle high-volume transactions.

Originally, Synergex was founded as a computer systems integrator, developing software and selling hardware tailored to a customer's specific needs.

"It started out being a really niche market. We've broadened our scope since then," Wong said.

In 1978, the company moved into software development tools. Synergex has just released its fourth software product line.

In the past three years, Synergex has moved into the consulting business, setting up management services and technology divisions.

Wong said many smaller software companies have good technical knowledge, but they often lack the business know-how to grow. Synergex, for example, will work with customers on things like marketing, accounting, trade show presentations and business planning.

On the technology side, consultants will work with customers to help them upgrade their products to take advantage of the latest high-tech advances.

"We've seen an opportunity to grow by helping these other companies grow," Wong said. "The more our customers sell the more our company sells."

In mapping out its long-term growth strategy over the past two years, company directors and senior management looked at three options:

"We wanted to develop a strategy that was going to allow us aggressive growth," Wong said. As a result, company officials chose the third option, deciding to build a network of business software subsidiaries via acquisitions -- primarily working out agreements with existing customers.

Its first deal, expected to close by the end of December, is for long-time customer Health Business Systems, a Philadelphia-based company that sells software for pharmacy management systems such as prescription drug mail-order houses. HBS has 75 employees and $8.5 million in annual sales.

Initially, Synergex will pursue other health-care related software companies like HBS to develop a market niche. "We're looking for companies with good solid products," Wong said.