Last checked at 10 Dec 2008 07:00
MANPOWER SOFTWARE PLC
ACQUISITION OF THE BUSINESS AND CERTAIN ASSETS OF BAUM HART & PARTNERS
Manpower Software ("Manpower Software" or "the Company") has agreed to acquire the business, goodwill and certain assets of Baum Hart & Partners ("BHP" or "the Partnership") for a total consideration of up to £2.2 million, of which £1.7 million is payable in cash at completion. Please refer below for further details on the total consideration.
The acquisition is expected to close on 17 December 2008 ("Completion").
BHP's business
BHP, which was established in 1990, is a provider of integrated software systems, consultancy, training and support services principally to the National Health Service ("NHS").
BHP has 15 employees (including the managing partner, Mr Chris Lee) who will all be joining Manpower Software as part of this acquisition. BHP operates solely in the UK. In the year to 31 March 2008 (the "Financial Year 2008"), BHP generated revenues (according to the unaudited management accounts of the Partnership) of approximately £1.8 million and EBITDA (prior to partner drawings) of approximately £790,000.
BHP generates revenues from perpetual licence fees, annual support and maintenance, hosting, transaction charges, consultancy and training services. Revenues from support and maintenance, hosting and transaction charges (contracted revenues which are recurring in nature) amounted to approximately £1.1 million (some 60% of total revenues) in the Financial Year 2008.
The principal product of BHP is StaffBank, an application for the placing of staff into temporary positions from a bank of employees. In addition, BHP offers a range of financial accounting products developed for the UK healthcare and education markets, and MESaLS, a web-enabled requisitioning, logistics, tracking and stock management application for the healthcare market.
BHP's customers include NHS Professionals, an organisation developed by the Department of Health to provide innovative, flexible staffing solutions for the NHS. BHP has developed and manages the StaffBank application used by NHS Professionals to support approximately 90 NHS Trusts in the provision of flexible, temporary staff.
Consideration
Initial consideration of £1.7 million will be payable in cash on completion subject to certain financial adjustments and a retention of £150,000 for a period of 18 months to cover potential claims under the acquisition agreement. Manpower Software intends to finance this initial consideration from its existing cash resources.
Deferred, contingent consideration of up to £500,000 will be payable in two equal instalments shortly after the first and second anniversaries of Completion. Each deferred consideration payment will consist of £200,000 in cash and, at Manpower Software's discretion, either £50,000 in cash or in Manpower Software's ordinary shares. Manpower Software intends to finance the cash element of the deferred consideration from its own cash resources. The issue price for any ordinary shares issued by Manpower Software to satisfy any share element of the deferred consideration payment will be by reference to the average closing mid-market price of the Company's shares during the 15 business days prior to issue. The deferred consideration payments are contingent on the managing partner of BHP, Mr Chris Lee, remaining with Manpower Software as a full time employee.
Working capital on acquisition
Manpower Software will acquire only certain assets of BHP. These will include the entire debtor book of BHP but Manpower Software will only retain those cash and debtor balances which relate to support and other services to be performed after Completion. Any monies collected by Manpower Software on behalf of BHP in respect of pre-Completion debts will be repaid to the vendors of BHP. On the basis of the unaudited management accounts of the Partnership as at 31 October 2008, trade debtors amounted to £543,000 and deferred income in respect of support contracts amounted to £484,000.
In addition to the above, there will be an apportionment of periodical outgoings and receipts as at Completion between Manpower Software and the vendors of BHP.
Transaction rationale
The Directors believe the acquisition of BHP has a number of key benefits for the Company, including in particular:
acquiring significant, recurring revenues in the form of support and maintenance, hosting and transaction-based services revenues of approximately £1.1 million;
acquiring the technology platform (StaffBank) that is used by NHS Professionals;
the opportunity to expand Manpower Software's MAPS Health Suite through further development of certain products of BHP; and
earnings enhancement - the Directors believe the acquisition will be earnings enhancing in the Company's first full year of ownership, before any amortisation of intangible assets or impairment review of goodwill.
Following Completion, Mr Chris Lee will become a senior employee of the Company with principal responsibility for the continuing operations of BHP and, in particular, the relationship with NHS Professionals. Manpower Software expects to invest in additional sales and marketing support for BHP.
Ian Bowles, CEO of Manpower Software, said:
"Our business strategy for the Healthcare sector is to be the leading supplier of workforce optimisation solutions to the UK NHS and broader healthcare markets. The acquisition of Baum Hart & Partners considerably strengthens our position in the UK NHS market with regard to temporary staffing solutions."
Chris Lee, Managing Partner of BHP, said:
"The strategic fit of Manpower Software and Baum Hart & Partners is excellent for customers and staff. Manpower Software has significant resources to invest in the customer base and products of Baum Hart & Partners."
Enquiries:
Manpower Software plc
Ian Bowles, Chief Executive Officer
Simon Thorne, Chief Financial Officer 020 7389 9500
Numis Securities Limited
Michael Meade / Brent Nabbs (Nominated Adviser)
James Black (Broker) 020 7260 1000
Strata Partners (Financial Adviser)
Edward Roskill 020 7730 1200
10 December 2008