There’s no stopping Capita’s acquisition spree right now. However, following recent big deals for Vertex private sector earlier this week (see Where next for Vertex after Capita disposal?), and Ventura last month (see here), the BPS market leader is now returning to its tried and tested small, bolt-on M&A approach, acquiring Cedar HR Software from Advanced Computer Software (ACS). Capita is paying £15m on its usual cash free, debt free terms, which equates to a price sales ratio of 2.4 times revenue of £6.2m in its most recent year to 28 February. The acquired business also made a pro forma operating profit of £2m (giving it a healthy 32% margin). For ACS meanwhile, we think this disposal is more about it 'sticking to its knitting' in healthcare software and services.
Capita said it is aiming to put together “a platform for transformation” in the Police sector, building up capability through its takeovers of Sungard Public Sector last December (see here), which provides IT services and command and control systems for the Police, and mobile software developer Beat Systems in July. This latest purchase will give Capita the intellectual property to offer payroll, rostering and scheduling, finance and procurement to the Police, and 30 of the UK's 53 forces as customers including Greater Manchester, North Yorkshire and Thames Valley police. Essentially from a standing start last December, Capita now has relationships with the majority of Police forces in England. But it has yet to translate any of these into all-important BPO contracts.
This acquisition shows just how keen Capita is to break into the Police sector BPO market, having suffered a set back last month when it failed to get shortlisted on a key £200m bid at Lincolnshire Police (see here). Rivals Steria and G4S made the grade that time. As my public sector colleagues have pointed out (see Changes afoot for Police ICT), opportunities for BPO and IT transformation are really hotting up as a result of the unprecedented spending cuts being introduced across the English forces. Capita’s challenge is to now integrate these various capabilities into its secure information solutions business (which also includes Sungard and Beat), so that it can offer an end-to-end BPS offering to the Police. With all the M&A Capita has been embarking on of late, management could well have its work cut out.