Breakaway Boosts Middle-Market E-Services Position With Eggrock Acquisition

Breakaway Solutions Inc., a provider of business-to-business E-commerce services for middle-market businesses, today disclosed plans to acquire Eggrock Partners, a privately held systems integrator and application service provider, for $250 million in stock.

Breakaway provides strategy, integration, application hosting, and support to companies looking to move into the E-commerce market. Eggrock was an ideal acquisition because of its similar business model, culture, and consulting approach, says Gordon Brooks, Breakaway's president and CEO.

The companies share a common background: executives from both firms, including the CEOs, were formerly consultants with Cambridge Technology Partners. With the acquisition, Eggrock president and CEO Maureen Ellenberger will become VP and chief innovation officer at Breakaway.

Breakaway had been planning to expand, expecting to fund its growth with money raised in its initial stock offering last fall. "In 2000 and 2001, we planned to open more regional offices, create more hosting and solution centers, and increase our head count," Brooks said. The acquisition, he said, puts the company one full year ahead of schedule.

Brooks is bullish on the company's potential for growth, citing a Forrester Research report that stated middle-market companies will account for 53% of overall spending on E-commerce services this year. "The market is huge, it's underserviced, and we are the only public company currently serving companies with revenue under $500 million."

Jennifer DiMarzio, associate analyst at Summit Strategies, expects the deal will strengthen Breakaway's position in the market, allowing the it to expand its reach. "They have gained skilled people, incredibly important with today's labor shortage, and two solution centers. It's good news."

Investors reacted favorably to the deal, pushing Breakaway's stock up 4-5/8 to close at 74.

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