Monday, 31 March 2008

Small meals for both Capita and Sage

Holway's two Boring Award holders both made small acquisitions today

Capita has acquired a small UK insurance services firm for £16.5m. Lancaster Insurance Services specializes in luxury car and holiday insurance (among other areas), and is forecast to generate £1.7m operating profit on £6.6m turnover for the year ended 31st December 2008

Sage has acquired software company Tekton Group Ltd for £21m cash. Tekton provides specialist construction software, implementation and support services to more than 230 companies throughout the UK & Ireland. Tekton had revenues of £4.5m for the half year to Dec. 2007.

This is typical of both Capita and Sage. Both companies have made several hundred of these relatively small acquisitions in the last 20 years. Although obviously a number have been a lot bigger than this one, none of their acquisitions have ever broken Holway's Acquisition Indigestion rule of more than 50% of its current size - indeed the vast majority have been under 10% of their then current maket value. Eating small meals, often is the best advice.

Of course, the wrong food can still cause indigestion - what ever the size of the meal! For Sage Tekron seems to be right on this count too. It keeps within Sage's current territory of SMEs and, of course, is in the UK. It's appeal is adding a new vertical to the ever growing Sage list of sectors covered. Capita is already active in the insurance broker sector so Lancaster is pretty run-of-the-mill for Capita too.

Other acquirers take note!

No comments: