Sunday, 30 March 2008

SITS companies “dropping like flies”

As I reported on Friday Civica is the latest UK SITS company to delist in a £190m MBO.

On 28th Mar 08, the FT reported Paul Lewington of Close Brothers saying that UK SITS players were “dropping like flies” as 15% of the UK’s quoted SITS companies have delisted in the last year.

In the last 12 months, we have lost many of the mid caps like Xansa, iSoft, Northgate, ICM, Surfcontrol, IX Europe and Torex as well as a host of smaller players. Indeed, in the first three months of 2008 we have ‘lost’ Civica, Chelford, CODA, Computerland, Northgate, NSB Retail and Vega. On top of that Clinphone, Flomerics and Netstore are subject to current bid ‘negotiations’. SITS companies valued at c£2.25b have been taken off the market with one-in-three being ‘public to private’ PE backed deals rather than the more normal trade buys. It is telling to note that Telecity is the only SITS IPO in the last 12 months.

On the one hard, the trend is hardly new. I’ve reported a nett decrease in the number of UK quoted SITS companies every year since 2000. I’ve also made it clear that the mid-sized players are basically ‘doomed’ in what is overall a ‘nil growth’ sector. Get Big, Get Niche or Get Out is unfortunately truer today than it ever has been. But, and I’ll check my records on this, I don’t think I have ever seen such a large negative nett figure.

What is really depressing is that I don’t think the funds realised by these SITS sales are being recycled back into the SITS sector.

Who next?

In our M&A in 2008 article on New Years Day, Detica, Civica, Coda, Axon, Innovation, Anite and Dicom were listed as the SITS mid caps which could fall in 2008.

So here we are after just three months and we have already lost Coda and Civica from the list! I, for one, wouldn’t put a bet on any of the remainder lasting the year as a quoted company (although the odds are probably against all of them disappearing!)

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