With the acquisition of information management software solution provider Pentana Limited, announced this morning, Ideagen has launched itself into another vertical market. The compliance-based information management software provider is acquiring Pentana for an initial net cash consideration of £2.25m (taking into account Pentana’s cash reserves of £1.175m). It will pay a further £0.8m dependent on performance in the first full financial year.
Pentana’s core focus is on the financial services sector; amongst its 350 customers, from which is derives £2.4m of revenues, it counts eight of the top ten UK accounting firms. Ideagen’s strategy to focus on specific verticals, which have to date predominantly been pharmaceuticals, aerospace & defence (A&D), healthcare, utilities and manufacturing, has been successful for the company (see Ideagen: vertical focus pays off). This acquisition gives Ideagen a strong entry point into a new sector: financial services. It will also look to integrate Pentana’s solutions into its own Compliance Platform and will pursue cross-selling opportunities.
This is a significant deal for Ideagen, which in its last financial year achieved revenues of £6.5m. It is in line with the company’s strategy of acquiring businesses with strong IP and recurring revenue. Recently, other acquisitions have included Proquis, Plumtree and MSS; Plumtree was of a similar scale to this latest purchase. We will watch closely to see how the integration of Pentana progresses; Pentana’s profit margins (PBT of £0.01m in its last financial year) are low compared to Ideagen, and it is hoped that £0.4m of synergies can be achieved in the 12 months to April 2015 allowing the acquisition to be earnings enhanging that year. Ideagen has embarked on several acquisitions in a short space of time, growing the business rapidly. It will require careful management.