Contents

Sector Overview
Buyers Sentiments
Private Equity firms continue to participate
Non-traditional acquirors buy digital
Acquirors worth watching
Our recent transactions
Rockworth round-up

Sector Overview

Our view of the market in one word – buoyant.

We hear a lot of doom and gloom about the British economy and its prospects, but we do not find these fears borne out when it comes to mergers and acquisitions.

In the broad and evolving IT sectors, there is increasing demand for acquisitions where a clear strategic value can be identified, as illustrated in the companies here. Back to top

Buyers’ M&A sentiments

Our research indicates a wide appetite for direct acquisitions by established firms in these markets.  Advanced (prev. Advanced 365) has announced a pro-active search according to their CFO Andrew Hicks, underlining their commitment to growth following their April acquisition of software solutions provider Kirona, a deal that generated a 3.1x return for exiting private equity house Livingbridge.

Our discussions with the likes of Civica, Liberata, Cognizant and Idox further validate this broader acquisitional interest where a clear value proposition can be delivered. Back to top

Private Equity firms continue to participate

May saw Hive HR (Newcastle based employee engagement SaaS publisher) secure a £1.2m investment package, led by Private Equity firm Maven. The funding will enable Hive to continue an investment programme in sales and marketing, as well as roll out product development and enhancements to their clients.

Silverfleet Capital has backed the management team of Microgen Financial Systems (business critical software developer) in a buy-out from Aptitude Software for a reported multiple of 2.8x revenue, positioned to complete in late June. Silverfleet are proponents of the ‘buy and build’, or ‘land and expand’ strategy, helping their portfolio companies achieve accelerated growth through clear focus on management support and bolt-on acquisitions.

In short, businesses showing solid growth and backed by a committed management team to drive their strategy forward will find Private Equity firms keen to invest their ever-increasing reserves into this sector. Back to top

Non-traditional acquirors buy digital

We’ve seen JustEat acquire Practi (provider of tablet based Point-of-Sale and restaurant management systems) in April and large consultancy firms such as Accenture continue to make specific digital acquisitions for highly strategic reasons. Frequently these buys are made to entrench or gain a competitive advantage through rapid access to software and IT solutions skills. Back to top

Acquirors worth watching

Allocate Software (workforce-management Software-as-a-Service provider) announced in May that they are actively looking for acquisitions to “gain cross selling opportunities and expand our geographic reach” according to CEO Nick Wilson. Management will focus initially on UK-based transactions, although it could also make moves in Germany and the US in an unspecified timeframe, Wilson said.

In May, listed Nasstar (Managed IT Specialists) CEO Nigel Redwood announced that, after a period of inactivity since 2016 to focus on integration of previous acquisitions, they are alert to opportunities and expect to be ready to start a new process of acquisitions by the end of the year. When assessing opportunities, Nasstar have stated that they are willing to consider factors including a target’s annual recurring revenue rate and market expertise, rather than its size.

John Cotterell, CEO of Endava (Tech. solutions and services) stated “M&A is very much part of our thinking”. After the successful integration of their Velocity Partners acquisition, they are on the look out for smaller ‘tuck-in’ acquisitions that add new capabilities within a sector, domain, geography or technology. He added that Brexit was unlikely to have any impact on the business: “demand for our services remains strong, and our pipeline is full in all geographies and verticals”.

Such positive statements by industry figures at the cutting edge of the industry give weight to our belief that there is continued demand for well-run businesses.  If anything, the challenge is distilling the market down from ‘interested in acquisitions’ to ‘seeing a clear strategic fit, appreciating the potential value-add of the transaction and willing to price it competitively’. Back to top

Our recent transactions

Sale of i2N to Northgate Public Services – i2N is a specialist supplier of SaaS systems into the Public Sector, with a particular focus on Justice, Prisons & Probation. They were acquired by Northgate, a subsidiary of the market leader Japanese IT solutions company NEC Corporation.

Stephen Callaghan, chief executive officer of Northgate, said, “We see a good synergy between NPS and i2N. This acquisition will boost our offer in the important justice sector whilst providing a strong opportunity for growth for i2N.”

 Jim O’Connor, CEO of i2N said, “We were concerned to find the right partner and, if a match was not available, to continue to expand within our specialist government sector. Our priority was exhaustive but discreet research to find the right potential acquirer, with the synergies to complement and enhance the i2N offering. Joining the Northgate team opens up new and exciting markets for both businesses in the development of critical software that spans the entire justice sector.”

Sale of Porge to Trufin PLC – Porge provides sophisticated software platforms to supply public-sector market insight research and data services, analysing millions of public sector invoices per month to build detailed models of public sector purchasing patterns. TruFIn PLC is an AIM listed company focused on growing Fintech and banking businesses to provide niche lending, technological and service solutions to the working capital and early payment markets.

Ben Jackson, Chief Executive of Oxygen Finance Group Limited said: “We have long been an admirer of the Porge business and the additional product offerings that we can provide to our clients is meaningful. We are delighted to have had the opportunity to make this strategic acquisition.”

Alice Watson, Founder of Porge said, “Selling a business that you’ve founded, managed and grown for nearly 20 years is never going to be easy, and I would urge anyone embarking on such an epic task to secure professional help. Rockworth provided the support, experience and the technical knowledge that we needed to secure a successful sale.”

Sale of TeamSeer to Access Group – TeamSeer is an award-winning SaaS based staff planning and team management solution for SMEs and Blue Chips. The Access Group is one of the UK’s leading providers of software and solutions to mid-market business.

Chris Bayne, CEO for Access, commented, “TeamSeer provides a significant step change for SMEs moving away from paper-based and Microsoft Excel systems or for blue chip clients integrating to large-scale vendors such as SAP or Oracle. It is the perfect addition to our software portfolio and TeamSeer has demonstrated strong growth with plenty of future potential.“ Back to top

Rockworth round-up

Our experience shows us that successful transactions with acquirors such as Northgate, TruFin and Access are the result of exhaustive market research processes, numerous in-depth (but anonymous) conversations with C-suite figures, multiple discreet meetings with potential acquirors and a truly competitive bidding process.  This will always help to ensure the best strategic fit for the business and a reflective value and offer structure.

Naturally if businesses go out to market unprepared, taking an ‘estate agent’ approach to investment without a clear understanding of the specific synergy value that can be realised with each of the companies to whom they are speaking – they are unlikely to attract the widest, best and highest-paying pool of potential investors or acquirors. The problem isn’t one of appetite in the market; if there is a problem, it is one of presentation and preparation.

Realising growth & maximising value

Rockworth works with private companies providing lead advisory business sale and transaction services and long-term exit-planning and strategic growth.

We use uniquely confidential methods, combined with creativity and hard evidence, to create a choice of options for our clients.  We always focus the market down to serious interest before even revealing the existence of a client, let alone a client’s identity.

We guide our clients, with rigorous attention to detail, throughout the negotiation and due diligence process until the deal is completed.  Our approach is open and collaborative, keeping clients in full control of the transaction.

Value-Vault

 Explore our online portal, Value-Vault. It’s a free-to-access, no-obligation questionnaire and is designed to provide either a standalone ‘health check’ for a business, or to form the starting-point for a more comprehensive process in preparing your business for sale. Back to top