M&A Activity in the ICT Sector - February 2010

It’s finally here – we are officially out of recession! So, are things looking up and have we turned the corner? Well the UK ICT sector is still the largest in Europe (with over one million people employed and contributing an enormous 10% of UK GDP) yet according to UK Trade & Investment it is still expected to grow to over £29 billion by 2012.  Furthermore, PricewaterhouseCoopers (PwC) reports that at least €15 billion of announced deals are set to complete in the first quarter of 2010. Within the UK, the sector bottom line profitability has been managed effectively for many in 2009, yet achieving high growth has proved more challenging, therefore acquisitions are likely to be an integral part of most corporate growth stories in the foreseeable future.

PwC have also highlighted five ‘hot spots’ for 2010 – Financial Technology, Software-as-a-Service (SaaS), Convergence, Healthcare Software and IT Services (SITS) and Security Solutions.

We have seen a definite increase in activity, with greater competition for sale mandates. This perhaps reflects the growing realisation that cash in the bank could be put to much better work.

Recent M&A Activity

There has certainly been a flurry of activity recently and it appears that size really doesn’t matter as we see action from large multinationals and SMEs. We start with IBM, who are currently celebrating their 30th acquisition within the information management and analytics segment after acquiring data management company, Initiate. Meanwhile, business IT solutions provider, Technology Services Group Ltd, have reached their 23rd acquisition since their inception in 2003 by acquiring Croft Technology plc. Google are also continuing to snap up various companies, the latest being the social search engine company Aardvark. Another large scale deal has been agreed with primary care sector software and IT services provider, Advanced Computer Software plc, who have acquired Redac Holding Ltd, owner of COA Solutions for an impressive £100m.

Global business and technology leader IBM have acquired Chicago-based Initiate Systems, this is IBM’s 30th acquisition in the information management and analytics segment. Initiate helps healthcare providers and other government organisations manage and organise data across various sources. The acquisition is aimed at boosting IBM’s healthcare offerings. Terms of the deal have not been disclosed.

Capgemini Group announced its acquisition of on-demand purchasing solutions provider IBX, and with it the availability of the industry’s first global end-to-end, Procurement-as-a-Service offering. Financial details of the deal were not disclosed.

Google’s drive forward continues with the acquisition of Aardvark for a reported £50m (the brains behind the first social search engine, finding people not web pages). Aardvark provides a way to get quick, quality answers to questions from your extended social network. Site visitors can ask questions via an instant message portal or email and the questions are cleverly farmed out to individuals contacts (and their contacts) based on what they have said and what they have knowledge of. Today Aardvark continues to operate as part of the Google family of products.

There have also been a couple of online gaming acquisitions. Firstly award-winning online gaming operator, 32Red Plc has announced that it has acquired the assets of two European-focused online casinos – Nedplay casino from Floryntia Play Group NV and Golden Lounge Casino. The business assets acquired in both cases consisted of the player database, software agreements, the domain names and other intellectual property totaling £115,000. Secondly, leading software provider to the online, mobile, TV and land based gaming sector, Playtech Ltd have acquired the business and assets of Virtue Fusion, a developer and licensor of online bingo products, for £29m. In addition to its core UK market, Virtue Fusion has a growing international presence in other European countries and an impressive portfolio of licensees including well known brands such as Mecca, William Hill, Ladbrokes, Virgin, Sky, Bet365, Paddy Power and Crown Bingo. This inevitably enhances Playtech’s own bingo offering, bringing new licensees and boosting relationships with existing clients. It also positions Playtech as the leading supplier in all of the key product segments in the online gaming industry.

In addition, Essex based Access Group, the mid-market consulting, software and solutions provider, has acquired Select Software in Canterbury, a provider of web-enabled HR solutions. The acquisition is part of Access’s strategy to invest in, and expand, its software and services portfolio beyond the finance function, providing a complete suite of organisation-wide business solutions. Independent business IT solutions provider Technology Services Group Ltd (TSG) has acquired IT consultancy and support company Croft Technology plc for an undisclosed sum. The acquisition is the twenty third for TSG since its inception in October 2003, and represents continued progress in building a UK-wide service network, providing complete IT services to small and medium sized businesses. The acquisition will allow TSG to develop its portfolio and establish a new division, to be branded TSG Enterprise Solutions. Advanced Computer Software plc (ADS), a leading provider of software and IT services to the primary care sector, has acquired Redac Holdings Limited, owner of COA Solutions (COA), from Alchemy Partners for a total consideration of £100m. The transaction is financed through ACS’s cash resources and new bank debt. COA has been a leading supplier of software solutions to the public and private sectors for over 25 years. The acquisition immediately strengthens ACS’s position within the healthcare and public-sector markets, providing access to key decision makers and therefore significantly enhances the opportunities for cross selling both ACS and COA products.