Misys Plc’s takeover of ACT Group Plc will create what is likely to be the UK’s largest all-British software and services company. The two companies had combined turnovers of more than ú280m in their last full year results. It transpires that Misys and ACT had been discussing the possibility of a merger for some 18 months, prior to ACT’s takeover of BIS in July 1993 (CI No 2,202). ACT’s profits warnings last month (CI No 2,592), after which its shares plunged to a low of 69p each, rekindled Misys’ interest in the Birmingham-based company. Misys is likely to combine its banking software business with ACT to create a worldwide operation. It is envisaged that the new banking software company alone will have an annual turnover of around ú140m with op erating profits of around ú25m. Since going public in 1987 with a market capitalisation of around ú8m, Misys, under chairman Kevin Lomax has had a predatory history. The company was originally set up to market a computer-aided drafting system, but Lomax quickly realised that there were richer pickings to be had in the financial software market. However, the company has never confined its acquisitions to that sector alone, and by the start of this decade, this led to accusations that the company lacked focus. But Lomax’s acquisitions always had a definite product rather than services tinge to them. In 1990-91 the group’s profits halved and sales feel by 10%. During the worst of the UK recession Lomax tightened the subsidiaries belts as sales declined, but still had the courage to continue with his aggressive acquisitions policy. A New York office was set up in 1993 to investigate acquisitions there, but so far Misys has stuck to the UK. The recent trend has been a move away from hardware to software and the continued growth of the Fina ncial Services Division, which last year contributed 53% of group operating profits. ACT, on the other hand, has long concentrated on software, having sold its Apricot Computers Ltd division to Mitsubishi Electric Corp in May 1990.
Low profile
It enjoyed strong growth through the early 1990s, though it has experienced problems more recently, particularly in the UK. Last year’s disposals increased the company’s focus on financial software. At the end of the last financial year, some 96% of ACT’s profits and 88% of turnover came from the Financial Software Products Division. The newly-expanded Misys will be targeting the world’s developing economies, as well as what Misys sees as the increase in facilities management in the banking sector worldwide. Misys shares fell 50 pence to 359 pence, while ACT’s shares rose 31.5 pence to 108, only just shy of the 109 valuation after the fall in the Misys share price, indicating that there is likely to be little resistance to the takeover. The identity of the buyer is likely to come as something of a surprise to people that get most of their news from the Financial Times: while the ACT name crops up regularly in the pink pages, Misys seldom gets a mention, but this low profile is deliberate on the part of Lomax, who comes from the Hanson Plc stable and from the start set out to create a federation of related companies rather than a monolithic high profile group. His strategy was outlined in CI Nos 1,120, 1,123 in 1989, and he has pretty much stuck to the game plan ever since.
