Leeds e-Procurement Firm Science Warehouse Is Acquired By Advanced Business Software

On Friday, Mercia Technologies announced that Science Warehouse (SW), the Leeds-based e-procurement technology firm, has been sold to Berkshire (UK)-based Advanced Business Software and Solutions Ltd.

Mercia, an investment company which invests in small and start-up technology firms and is quoted on AIM, had invested some £9.2 million in the firm over the years. SW was originally a spin-out from Leeds University back in 2000, and we’re not sure exactly when Mercia’s first investment was made, but a further £3.5 million investment in 2015 took their stake to 63%. Other smaller investors, including founders and staff, held the rest of the equity.

The sale price was £16.9 million in cash, and Mercia put a brave face on the deal, saying their share of this “represents a return of 14.2% on total investment cost of £9.2m”.  But making a return of 14% over at least five years does not exactly set the private equity pulses racing.

That reflects some fairly tough years for the firm, as competition increased in their core market of purchase-to-pay technology for further and higher education clients. Their original “USP” was the ability to provide user-friendly catalogue buying for very complex requirements (such as in a laboratory situation), but in recent years that capability has greatly improved amongst the bigger and broader tech providers including SAP Ariba, Proactis and Coupa.

But the impressive Philip Padfield, who joined as CEO at SW some three years ago, certainly saw the need to invest, and at their customer conference in June 2017, we saw some promising signs in terms of that investment going into sensible product and customer service improvements. Padfield also built a pretty strong senior management team.

Their last full-year accounts (up to March 2017) showed revenues up some 5% on the year to £4.4 million, and a loss of £458K before tax – up from £365K in the previous year. So the price paid by the buyer here represents something close to four times trailing annual revenues, which seems full given the growth rate and profitability.

But Advanced are already a “go to market” partner for Science Warehouse, selling the product into various accounts, so the firms know each other pretty well, which is always a good sign in this sort of situation. Advanced has a wide range of software products, and sells those into public and private sectors. With revenues of approaching £100 million, they’re an order of magnitude bigger than SW, and if they have a strong sales engine (which is likely) they may well look at the Science Warehouse product and reckon they can drive sales pretty quickly.

We obviously don't know at this stage what is happening to Padfield and other Science Warehouse staff, but this is not an acquisition where the buyer already has a similar business with staff already doing equivalent roles. So we suspect and hope this is potentially good news for the team in Leeds rather than bad. We wish them good luck  – a good bunch, in our experience - and we’ll wait to see what the new owners have in store for the firm and their customers.

 

 

 

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