Deltek deal shows Atlantic trade winds are blowing

Contact: Brenon Daly

As the hackneyed old phrase goes, there is opportunity in crisis. We were musing on that as we watched the euro plummet at the end of last week to a four-year low against the dollar. With countries such as Greece, Portugal and, most recently, Hungary unable or unwilling to run balanced books, much of the continent looks shaky. Reflecting the worries caused by the ballooning debt in many countries, the euro has shed 15% of its value compared to the US greenback.

While it is undoubtedly a tough time for many of our cousin countries across the Atlantic, some US companies might be having a different take on this period of European malaise: it’s a great time to do some opportunistic shopping. For starters, US buyers are getting a nice little discount thanks to the dollar. If, for instance, a US-based company was eyeing an acquisition in Europe that would have run it $150m at the start of the year, the current cost is less than $130m. And don’t forget that a lot of US companies have a lot of wampum sitting over in Europe that can’t be brought home without a heavy tax hit.

There’s also the fact that the recession hasn’t actually ended for many of the European companies, at least not based on their stock prices. Consider the smartly frugal bit of shopping that Deltek Systems did late last week. The project management software vendor had been looking to expand across the Atlantic, and found a handy bargain in picking up Danish ERP provider Maconomy. (Deltek was advised by Arma Partners.)

In its largest acquisition ever, Deltek will pay around $72m in cash for Maconomy. Even though the premium is substantial (Deltek’s offer is more than triple where Maconomy shares traded a year ago, and twice the price of the stock at the beginning of the year), the valuation of the target is actually lower than that of the acquirer. On an enterprise value basis, Deltek itself trades at about 2.1 times trailing sales, while it is paying just 1.5 times trailing sales for Maconomy. (And again, the valuation of the Danish software firm includes a generous premium.) Bargains like that may well get the trade winds blowing again across the Atlantic.