The latest acquisition of Advanced Computer Software (ACS) fits the established pattern, in that it will increase the customer base and provide a platform for cross sell and managed services opportunities.
The UK software group has acquired Computer Software Holdings (CSH) from HG Capital (who acquired it in 2007). It provides accounting and back office software to the UK professional services/legal market, which is not specifically addressed by ACS as far as we are aware, and CRM to the not-for-profit sector. However, ACS is viewing CSH as a vehicle to grow its back office capabilities overall. CSH’s 12,000 customers across UK, Ireland and the US will add scale to the Business Solutions division of ACS and improve its competitive stance in relation to Sage.
The £110m being paid for the company will come from cash, but mainly new bank debt. It will draw on the £44m (gross) raised from the recent placing (see here). CSH delivered EBITDA of £13.2m on revenue of £61.5m for the year to December 31 2012 and has 85% recurring revenue (of which £40m is contracted). It is expected to add to earnings immediately. Pro forma revenue for the enlarged group to 28 February 2013 is expected to be c£193.2m. All in all, it looks like a useful strategic fit. Given the amount of experience ACS has with acquisitions it should slot in neatly although it comes hard on the heels of the Serco Learning acquisition (now branded Advanced Learning) and two other acquisitions during the financial year (see the HotViews archive here).
ACS issued a pre close trading update for the year to February 28 2013 indicating revenue from continuing operations of at least £119m, which would be a 21% yoy increase, and adjusted EBITDA up 10%, to no less than £26.6m. The organic vs. acquisition split will be a useful indicator of performance come the full results.
In other news, existing non-exec Guy Millward who joined the board in November 2012 will on take on the role of Chief Financial Officer. He replaces Barbara Firth who will remain on the Board and become Chief Operating Officer with responsibly for acquisitions and integration, while Paul Gibson will remain COO responsible for operations across the Group. Clearly, there will be no let up on the acquisition front but we would like to see more explicit activity in the SaaS area.