I cannot count how many companies that have aggressively chased acquisitions all the way to the corporate knackers yard, but Advanced Computer Software (ASW) is not likely to join their number. This is buy-and-build as it should be, hoovering up a succession of bolt-ons on the relative cheap and turning them into far more than the sum of their parts.
Today's deal, the £110 million purchase of Computer Software Holdings, ups the ante yet all of the key boxes remain ticked. The price is fair, pitched at just over seven-times CSH's £14.9 million of earnings before interest, tax, depreciation and amortisation (EBITDA) to December, while bolstering the top line by £61.5 million.
For its part, Advanced Computer Software has around £119 million of annual sales before today's deal. CSH also brings some proprietary software, an extensive client base (about 12,000 customers) in legal, the not-for-profit sector (both new) and medical, with 85% of income stemming from recurring revenue contracts. This will fit neatly alongside its recent foray into education, representing an extension of its public/private sector expansion master-stroke. Analysts across the board have welcomed the deal, raising earnings estimates and share price targets, too.
One of the key ingredients to Advanced Computer Software's success has been an ability to cross-sell. One of the ways it does this is by providing multiple tools that can be seamlessly integrated into a customer's own IT system. This can be done on a piecemeal basis or as a package, covering grass roots applications such as human resources, payroll, document management and procurement. The payback for customers is often in weeks and months rather than years, as with many IT integration projects. This should be made all the easier thanks to chief executive Vin Murria's past as boss of old parent firm CSG.
Advanced Computer Software has in the past been described as a 'best-in-breed' partner by Kate Jack, the head of public sector for Everything Everywhere (the Orange/T-Mobile merged UK operation), credit hard earned. For Vin Murria's part, she can be rightly proud of her success. In her five years running Advanced Computer Software the chief executive has turned the company from a £6 million turnover microcap into a £119 million-plus IT and software services supplier. And while Murria's personal stock continues to rise so does the company's share price, which has jumped 77% in the past 12 months (adding an extra 6% today to hit 94.9p), fully earning her Stock Market Awards CEO of the Year gong.
