Proactis Buys Millstream – Another Smart Acquisition from Yorkshire eProcurement Firm

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Last week, Yorkshire-based eProcurement firm Proactis announced another acquisition, picking up Millstream Associates for some £15.5 million. It is the latest in a series of buys, starting at the beginning of 2014, which has seen the firm acquire software firms EGS, Intesource, Intelligent Capture, Due North and now Millstream. The acquisition will be funded by a proposed placing of up to 9,259,260 new shares at a placing price of 135p to raise £12.5 million and a revolving credit facility of £6.0 million.

Millstream has revenues of about £5 million and “adjusted EBITDA of £2.0 million”. That is a very impressive EBITDA percentage and means the firm should contribute strongly to both the revenue and profit lines for Proactis from the beginning. Rod Jones, CEO at Proactis told us:

“The acquisition of Millstream will add to PROACTIS’ already substantial presence in UK Public Sector procurement and brings further substantial financial and operational scale to the rapidly growing Group”.

Since the buying spree started, annual revenues at the firm have more than doubled, and the share price has multiplied six-fold, a very impressive story of shareholder value creation. Revenues for the year to July 2016 were £19.4 million, and operating profit was £1.9 million, up some 19% year on year. The strategy has been to roll up these smaller software firms in a sensible manner, extract some rapid cost synergies (mainly from overheads, we suspect), and develop a wider range of offerings for the customer base – including those clients gained via the acquisitions.

Millstream provides eProcurement solutions and has “over 4,000 customers for its Tenders Direct product, and over 50 public sector customers and more than 500 contributors for its bespoke portals and myTenders products”.

The products are mainly based around advertising of public sector contract opportunities rather than eSourcing or P2P; but as Proactis has those more complex capabilities already, the Millstream business looks nicely complementary rather than heavily overlapping. Here is Jones again;

Millstream will extend the PROACTIS buy-side customer base with strategic central government relationships and several hundred MyTender customers. These buy-side customers will gain access to PROACTIS complimentary solution offerings. On the supply-side, PROACTIS gets intelligence and know how of the commercial characteristics of this strategically important new customer group."

“PROACTIS has a history of acquiring companies and integrating the complimentary skills and capabilities. Its past major acquisitions, like those of Intelligent Capture, EGS, Intesource and Due North, follow exactly the same pattern of adding value – for customers and shareholders – in its quest to becoming a one-stop shop for all things procurement.”

Assuming the execution lives up to the strategy, and previous acquisitions seem to have been well assimilated, this should prove to be another smart move from the Proactis team.


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Voices (2)

  1. Sam Unkim:

    +1 Upvote for David.

    Proactis isn’t winning any friends here !!

  2. David:

    Is this a smart acquisition? I’m astounded by the price… more than 3x revenue and 8x ebitda seems high for this type of company. I’m also keen to see what level of “integration” will take place. Proactis so far have no integrated any of the solutions they have acquired, instead opting to integrate organization elements and marketing messaging but not technology. Looks like good financial engineering but not sure how much value there is for us procurement folk?

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