Trans-Atlantic transactions take off

Contact: Brenon Daly

It was a big and busy day on Wednesday for British companies shopping in the country’s former colony across the Atlantic. Collectively, the three deals boosted the total disclosed value of acquisitions by UK-based firms so far this year by nearly 20%. For starters, LSE-traded software vendor Micro Focus picked up one full Nasdaq-listed company and bits of another US public company, spending a total of about $155m. Taken together, the simultaneously announced deals are the second-largest transaction announced in 2009 by a UK-based buyer. Adding to that, British defense giant QinetiQ reached for a well-funded security startup in a deal that features a handsome valuation and a pretty rich possible earn out.

In the more significant purchase, Micro Focus picked up long-ailing Borland Software for $1 per share, or an equity value of about $75m. In the same breath, it also scored a business line from Compuware for $80m. Micro Focus says the addition of Compuware’s application testing/automated software quality (ASQ) unit will help bolster its existing ASQ offering, a suite of tools that it sells under the Data Express name.

One of the more interesting aspects of Micro Focus’ double-up deal is that the company tapped Arma Partners to run both processes. (The transaction was headed up by Arma’s Paul-Noël Guély, along with Keith Robinson, Varun Sunderraman and Graham Smith.) Arma has served as a kind of house bank for Micro Focus, advising on four of the company’s past five deals. On the other side of the table, Updata Advisors worked with Compuware on its divestiture and JP Morgan Securities advised Borland. We’ll have a full report on the moves by Micro Focus in Thursday’s 451 Group sendout.

In a separate transaction, QinetiQ (through its North American arm) moved deeper into the cyber-intelligence world by buying Cyveillance. Terms call for QinetiQ to hand over $40m upfront, along with a possible $40m earn out over the next two years. Cyveillance, which we understand didn’t use a banker, generated sales of about $10m in 2008. Look for a full report on the relatively richly valued transaction in tonight’s 451 Group MIS email.

Indian acquirers on the go

Announcing its largest deal ever, Indian systems integrator Infosys offered $753m in cash on Monday for SAP consultancy Axon Group. The deal is seen as a way for Infosys to build up its consulting business as well as its sales in Europe, where the UK’s Axon gets roughly 60% of its revenue. Pending shareholder and regulatory approval, the acquisition is slated to close in November. Some Axon shareholders, however, are holding out for more. Shares of the company on the London Stock Exchange have traded above Infosys’ offer price since the deal was announced.

Infosys’ acquisition of Axon would be the second-largest purchase by an Indian services shop, trailing only Covansys India’s $3.2bn purchase of business process outsourcing firm Fortune Infotech in 2005. In addition, the deal would bring to more than 60 the number of deals by Indian acquirers so far this year. That’s up from less than 20 per year in the first part of this decade. Meanwhile, M&A spending by Indian companies is likely to hit its highest level since 2005. Already this year, shoppers have spent $1.8bn on deals, which is within striking distance of the $2.1bn spent in all of 2007. This year’s M&A total will inch even closer to that tally if Axon shareholders succeed in pressing Infosys to up its offer.

Deals by Indian acquirers

Period Deal volume Deal value
Jan.-Aug. 2008 57 $1.8bn
Jan.-Dec. 2007 86 $2.1bn
Jan.-Dec. 2006 78 $672m
Jan.-Dec. 2005 38 $3.7bn
Jan.-Dec. 2004 7 $104m
Jan.-Dec. 2003 8 $132m
Jan.-Dec. 2002 16 $228m

Source: The 451 M&A KnowledgeBase