Deals

Advanced Computer Software Group plc Acquires Computer Software Holdings for £110m

Posted: 8th March 2013 09:39
Advanced Computer Software Group plc, (AIM: ASW, "ACS", "the Group"), has acquired Computer Software Holdings ("CSH") from HgCapital LP ("Hg") for £110m in cash.   The transaction has been financed through ACS's existing cash resources, by a recent share placing that raised £44m (gross), and by new bank debt. 
 
CSH is a leading provider of accounting and back office software to the UK professional services market (legal and coroners) and Customer Relationship Management (CRM) software for the not-for-profit (NFP) market.  It also provides accounting software to SMEs, as well as mobile solutions for field services operations. 
 
The acquisition will enlarge ACS's Business Solutions and 365 Managed Services divisions. It is is highly cash generative and will be immediately earnings enhancing.
 
The Group has published separately today a trading update for the year ended 28 February 2013. Revenues from continuing operations are expected to be up 21% to no less than £119.0m (2012: £98.2m) with adjusted EBITDA* up 10% to no less than £26.6m (2012 £24.1m). Cash conversion** remains strong at over 100%.  See separate statement for the full trading update.
 
The enlarged Group is expected to deliver pro forma*** revenue of £193.2m for the year to 28 February 2013, of which £160m is recurring (contracted and repeating), and adjusted EBITDA of £42.3m.
 
The Group has also announced that Guy Millward, an ACS non-executive director, will become Chief Financial Officer shortly and Barbara Firth, currently Chief Financial Officer will become Chief Operating Officer responsible for acquisitions and integration.  Paul Gibson remains as Chief Operating Officer responsible for operations across the Group - see separate announcement.
 
Acquisition highlights
  • Significantly enhances ACS's position and scale in its Business Solutions and Managed Services divisions
  • Strong recurring revenue and cash generation with proprietary software
  • CSH and its markets well known to ACS management
  • Cash consideration of £110m funded through ACS's existing cash resources and new bank debt:
 - Recent placing raised £44m (gross)
 - New £105m bank facility with HSBC, RBS and Silicon Valley Bank
CSH
  • Revenue of £61.5m and EBITDA of £13.2m for the 12 months to 31 December 2012
 - 85% recurring revenue (contracted and repeating), of which £40m is contracted recurring revenue with a further £12m of non-contracted repeating revenue
  • Leading software provider of
 - Accounting, back office, and document management  systems to the UK legal sector
 - CRM systems to the UK NFP sector
 - Mobile technologies to the commercial (non-healthcare) field services sector
 - Significant provider of accounting systems to SMEs
  • Approximately 650 employees with offices across the UK, USA and Ireland, serving 12,000 customers Enlarged Group
  • Pro-forma*** revenue to 28 February 2013 is expected to be approximately £193.2m, including £160m of recurring revenue (contracted and repeating)
 - Anticipated percentage revenue split between divisions: Health & Care 14%, Business Solutions 64% and Managed Services 22%
  • Pro-forma adjusted EBITDA, including £1.4m of early cost savings, is expected to be approximately £42.3m
 - Anticipated percentage EBITDA split between divisions: Health & Care 18%, Business Solutions 68% and Managed Services 14%
  • Approximately 1,900 staff serving 20,000 customers across the UK, USA and Ireland
  • A further £1.0m of cost synergies targeted within 18 months
  • Significant opportunities for cross-selling products and services including managed services, time sheet billing, mobile, CRM, document management
  • Opportunities for growth in Professional Services, Mobile Field Services and NFP sectors
  • Net debt of £65m at date of acquisition with strong cash generation profile
 
Vin Murria, Chief Executive of ACS, said: 
 
"This immediately earnings enhancing acquisition is a tremendous opportunity for both ACS and CSH which will also significantly enhance the scale of our Business Solutions and Managed Services divisions. The business and many of the management team are well known to us which will simplify the integration process. 
 
"CSH has strong recurring revenues and cash generation and proprietary software IP. The addition of this business will enable us to widen our addressable markets and, in particular, to grow our back office solutions capabilities.  The enlarged Group will be highly cash generative with over £160m recurring and repeating revenues and we expect our net debt to decrease swiftly. 
 
"The acquisition also provides multiple opportunities for cross-selling our growing portfolio of products and services, as businesses and organisations increasingly seek technology solutions to improve business performance and deliver economies."

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