BT has announced its intention to buy Tikit for approximately £64.2m – based on an offer of 416 pence in cash for each scheme share. This represents a premium of approximately 18% to yesterday’s closing price of 354 pence per share. Tikit supplies, installs, supports and fixes mission-critical IT applications and ICT infrastructure for legal and accounting firms. In its last full financial year (to end December 2011), it had headline revenue of £26.4m, down 2% on the previous year (see Tikit struggling to grow top line). Recent margin improvements were primarily due to the focus on sales of its own software.
BT’s intention is for Tikit to join a portfolio of six other separately managed businesses within BT Enterprises - a division of BT Retail. Inside of BT Enterprises, Tikit will essentially operate on a standalone basis, which means it should be able to preserve its reputation amongst buyers for legal/accounting sector expertise. For the acquisition to be a success, BT will have to ensure it retains key Tikit staff and a customer base that has been built over many years. We believe the intended structure should give it a fighting chance to do this. However, we are more sceptical about whether that structure will enable BT to achieve the level of integration required for the proposed cross-selling of BT ICT and network services to be a success.
At TMV we are always sad to see another British firm disappear from the UK SITS market, but at least in this case the buyer is also British!