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BIG PICTURE: Advanced Computer's last big deal as a listed company

Last updated: 08:42 25 Nov 2014 EST, First published: 09:42 25 Nov 2014 EST

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The growth story at Advanced Computer Software (LON:ASW) has caught the eye of private equity firm Vista Equity Partners, which is buying the company for £725mln.

The board of AIM-listed Advanced Computer (ACS) is recommending acceptance of the 140p a share offer, which is a 17% premium to the information technology company’s closing price on the day before the bid was announced.

The deal looks set to rob the junior market of one of its highest profile and most successful companies, not to mention one of its most dynamic chief executives in Vin Murria.

Murria took over the company on 23 July, 2008, at a time when it raised funds through a placing of shares at 17p each. The Vista take-out price is therefore a 724% improvement over a period of 76 months.

During that time, through a mixture of shrewd acquisitions and organic growth, revenue has grown from an annualised £12.6mln in the period to 28 February 2009 to £203mln in the year to end-February 2014.

Adjusted underlying earnings (EBITDA) last year were £45mln, up from an annualised £1.8mln five years earlier.

For the first six months of this financial year revenue was £108mln, up 9% year-on-year and adjusted EBITDA was £25mln, up 14%.

"We have created a substantial and robust platform, which will benefit from the considerable financial strengths and expertise in the software technology sector of Vista Equity Partners and support the wider ACS Group as it moves into the next stage of its growth," Murria said in a stock exchange statement.

Chairman Michael Jackson said the offer from Vista recognises the value created by the ACS management team over the past six years.

“At 15.8 times [earnings], the offer represents an attractive price - recognising the growth potential of the business whilst providing certainty in cash to ACS shareholders,” Jackson said.

Vista is a private equity firm focused solely on acquiring enterprise application software and software enabled companies. To date Vista has completed over 140 software and software-related transactions representing some US$32 billion in aggregate value, including 35 transactions in the last twelve months.

The consideration payable under the acquisition will be funded through a mixture of equity financing provided by funds run by Vista, plus debt funding from third party providers of debt finance.

ACS’s recent interim results revealed the cash generated from operating activities in the six months to the end of September was £23.7mln, giving plenty of scope for Vista to serve any debt it takes on to finance the deal.

At the end of September, ACS’s debt level was £37.9mln, down from £49.4mln six months earlier. At the time of the results, the rapidly dwindling level of debt prompted talk of more acquisition activity involving Advanced Computer, but few guessed that this time, the predator would become the prey.

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