PROACTIS acquires EGS – Rod Jones, PROACTIS CEO gives us the inside story

We featured the PROACTIS (their capitals, not mine...) acquisition of EGS recently, and last week we caught up with Rod Jones, the PROACTIS CEO, for more detail on the transaction. We started by congratulating him on creating some serious shareholder value - the share price has more than doubled since last autumn, on the back of organic growth last year of 10% plus and interesting ventures in India, and rose 50% when the EGS takeover was announced in January.

Jones is obviously pleased about this, but I had to confess that I hadn't kept up with all the developments.  If you remember, Isis Equity Partners was the largest shareholder in PROACTIS , and complained a year ago about the lack of progress and growth in the firm. But in October, Isis sold their stake, largely to Henderson Investors who are seen as helpful and long term investors by Jones.  (I wonder how Isis feel now, having missed out on over a £M by selling out before the EGS transaction)!

Of more interest to most users of EGS or PROACTIS software of course is the business logic behind the deal and what it might mean for them. Jones says that when EGS was put up for sale, Proactis knew that they had ‘good clients and good staff’ – he  points out that EGS has an excellent customer base of 74 SaaS based clients, pretty much all public sector. That fits well with the PROACTIS core business. EGS is profitable, and, as we said before, buying a profitable business for less than one times revenue looks like a good deal. There would not appear to be any real downside for current PROACTIS clients.

But I asked Jones what the prospects are for EGS clients.

"We're not going to force then off the EGS products. There will be no pressure to move, we will continue to support the EGS products, although we will start talking to clients about migrating to Proactis where we think this is appropriate”.

But what about further development of the EGS products?

"We will be putting the greater part of our effort into developing the PROACTIS products, but we expect a gradual transition over some time. And there are some interesting elements to the EGS product range that we may apply more widely".

How about internal efficiencies?

"There should be some but we're not looking to lose EGS staff, we don’t expect redundancies - they have some very good people. But there should be some overhead savings of course in obvious areas such as audit fees, non-execs, marketing perhaps".

And there may be further acquisitions, although Jones suggests we shouldn’t expect ‘anything meteoric’. There is hard work ahead in the UK and elsewhere, including India where the Tata link-up is ‘promising’ but still in its ‘early days’.

So our view is that EGS customers certainly shouldn't be panicking. They should expect a visit from PROACTIS fairly soon with a message about the benefits of switching, and to talk about the wider range of PROACTIS products, including spend analytics and sourcing. Of course customers need to look carefully at any pricing changes, but they don't strike me as a rapacious business who are looking for a quick win from EGS clients. They are likely to see this as a relatively long game, and this looks like a good move in that game.

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