Cephren and Bidcom Confirm Merger, Form Citadon

October 24, 2000

By Judy Schriener

Cephren Inc. and Bidcom Inc. have confirmed that they are merging and forming a new company that will be called Citadon. News of the impending merger appeared exclusively on construction.com on Thurs., Oct. 19. The two Internet companies that serve the AEC industry expect to legally complete the transaction by Dec. 1, but the two privately owned firms are moving ahead together as of now. Typing in bidcom.com or cephren.com takes you to citadon.com, with comprehensive instructions for customers of each company.

The new company truly will be a new entity and not just a mushing together of the two, say Citadon Chairman Rob Majteles and President and CEO Doug Sabella. Majteles was CEO of Cephren; Sabella was CEO of Bidcom. Not everyone and everything goes with the firms to Citadon, including some of the founders. On Monday, a combined number of about 100 people were laid off, mostly in marketing, business development, sales and administration to eliminate duplication. About 225 employees will join Citadon. Majteles emphasizes that all engineering and customer service personnel from both companies are intact, and that, in fact, Citadon will be hiring more engineers.

The company will be focusing on training and customer service and on integrating Cephren's document management and collaboration services with Bidcom's workflow process features, such as requests for information (RFIs) and other forms. That should take three to six months, say company officials. Citadon will be "exiting anything …where our model is to give away something," says Majteles. That includes repurposing data from CMD Group-R.S. Means cost estimator and Architects' First Source-and the free permitting service in conjunction with NetClerk, as well as the catalog efforts in which the company would give away information from building product manufacturers. "None of them are producing revenue-earning sources that people expect to pay for," says Majteles. Citadon likely will link up with a catalog service on a revenue-sharing basis. "I do not believe in the concept that the Internet is free….We're a grown-up Internet company," says Sabella. Before joining Bidcom in March, Sabella spent 15 years at Lucent Technologies, most recently as president of the $2.2-billion Communications Applications Group.

Majteles will be chairman

Sabella will be CEO.

Subscribers of Citadon will initially number about 30,000, with about 16,000 coming from Cephren and 14,000 from Bidcom, says Majteles. The construction value of customers' projects Cephren brings to Citadon is about $70 billion from Cephren and about $40 billion from Bidcom. Major customers include Fluor Daniel, Bechtel, GE Power Systems, Marriott International and Barton Malow.

Investment in Citadon will initially come from current investors in Cephren and Bidcom, including Bechtel, GE Equity, GE Power Systems, Warburg Pincus, Goldman Sachs and Internet Capital Group. In addition, Fluor is expected to be an investor in Citadon as it is in Bidcom. The investors are expected to come up with upward of $40 million for the new venture.

Much of the motivation for rivals Bechtel (a Cephren customer and investor) and Fluor (a Bidcom customer and investor) to encourage the merger is to try to drive adoption of technology in the industry. They also hope the horse they bet on will become the industry standard. "We do see that this e-space will have one winner at the end of the day," says Dan Stites, president of sales and marketing for Fluor Daniel. Officials at Barton Malow, which standardized on Bidcom at the end of June, are looking forward to the enhancements the integration will bring and also hope for increased standardization. "A merger like this will definitely drive some industry standards," says Phil Go, Barton Malow's chief information officer.

Jas Dhillon, co-founder of Blueline Online, which became Cephren earlier this year, and Daryl Magana, chairman of Bidcom, will be hanging their hats somewhere other than Citadon. Dhillon says he will be an advisor to Majteles and Sabella on an as-needed basis during the transition and then will be a partner with a venture capital firm called Digital Coast Ventures in Santa Monica, CA. Daryl Magana, co-founder of Bidcom, also will not be joining Citadon. He is traveling overseas and has not responded to requests for comment.