WorkPlace Software’s rocky road (see WorkPlace Systems: a year of sprints and hurdles) took another, hopefully positive turn today, with the announcement that it is under offer for £41m, an offer the board has recommended shareholders accept.
UK private equity house Lloyds TSB Development Capital (LDC) has created Wasp Management Software with the purpose of acquiring the workforce management software company. The cash offer is for 25 pence per share, an 81% premium on the pre-offer price.
WorkPlace bit the SaaS bullet in 2009 when it started offering its applications via the SaaS delivery and commercial model (in addition to maintaining its on-premise business) but has had a tough time adjusting (see WorkPlace Systems: a year of sprints and hurdles). For the half year to September 30 2011 it delivered an operating profit of just £286k although that was an improvement on the loss of £480k in the comparable period of 2010. Revenue rose to £5.3m from £4.7m. There were some good operating indicators though - gross margin increased to 90% (vs 88%) as the fixed cost element of it’s SaaS infrastructure was spread across more customers.
The offer should work out well for WorkPlace, injecting resources to stabilize and grow the business, which we believe it would struggle to do otherwise. And LDC may have bagged itself a bargain because WorkPlace has already done the SaaS heavy lifting particularly around supporting infrastructure.
LDC has a track record in investing in UK mid market technology companies and has had successful exits from companies like Iris and SSP. Current investments include OnApp which provides tools for hosting providers looking to set up public and private clouds, so there is some synergy within the portfolio. We could be seeing a lot more of LDC who plans to invest £200m in the technology, telecoms and media sector over the next two years and not surprisingly is eying the enterprise software SaaS prospects.