Proactis acquires Intelligent Capture – and trails their new network and supply chain finance offering

Proactis has made its third acquisition in this calendar year, not bad for a software company from the sleepy, market town of Wetherby, Yorkshire (see picture). They acquired EGS, a provider of  purchase to pay solutions, principally to the UK public sector, back in January. Then in April, they bought Intesource, a US based sourcing software, e-auction and services business.

In both cases, there appeared to be good business logic, and the prices paid were very reasonable in that Proactis bought profitable firms for prices that meant their own profitability and profit ratios should be enhanced. In other words, even without further synergy, the acquisitions should pay for themselves, unlike the vast majority we see.

Now they’re at it again. This week, they have acquired Intelligent Capture Ltd, one of the UK's leading providers of document scanning and optical character recognition services. “Intelligent Capture has more than 40 clients and generates over £1.25 million of profitable, annual recurring annual income.  The blue chip customer base includes BT, Screwfix, BDO and Henderson”.

Not a big deal, but again, the firm appears profitable (last year making £200K bottom line), so a low risk at an acquisition price of around £1.5 million – so Proactis has paid just over one times current year’s revenue. That’s actually more than the bargain prices paid for EGS and Intesource, which were in the 0.6 – 0.8. range, but still looks very reasonable.

And this time, the intent behind the latest buy is more interesting then the deal itself, as it has a real strategic purpose. Proactis is launching a new solution, Activate, to its customer and supplier network, and the invoice scanning and capture capability of Intelligent Capture will be instrumental to this new offering.

“The objective of the offering is to create a Global Trading Network between PROACTIS' customer base and their vendors. The Global Trading Network will encourage electronic trading, which is currently poorly adopted, creating efficiencies within the buy/sell transaction process. These efficiencies will be realised by significantly reduced costs for the Group's customers and also for their vendors, whilst also creating new commercial opportunities for both.

Activate increases transparency within the payment cycle for vendors by clearly showing where its purchase invoice is in the invoice processing cycle. Consequently, this creates an opportunity for vendor financing and PROACTIS is currently exploring financing options to accompany the Activate offering ... PROACTIS estimates that its customer base is spending approximately £60-80 billion per annum with their vendors”.

We’ll come back and look into their future plans and prospects in more detail shortly anyway, but this takes Proactis firmly into the world of e-invoicing and its linkage to supply chain finance – one of the huge trends at the moment. It also puts them (once they’ve developed their offering of course) into more direct competition with Tungsten, Basware, SAP/Ariba, and no doubt others before too long.

Proactis has acquired a further £7 million of revenue this year on a run rate basis, apart from anything else, so that is almost a doubling of size for the firm which reported £8 million revenue for 2012/13. That’s pretty impressive stuff, although of course we have to wait and see that converted into profit and real implementation of the bold strategy before we get too excited.

Last August, you could have picked up Proactis shares for just 18p each – today you’ll pay around high 50s, so we’ve missed our chance to get rich quick ... But the firm has been a source of unexpected excitement in the procurement solutions market of 2014!

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