Pegasus, the UK-based accounting software specialist, is set to make the biggest acquisition in its history.
Last week the company announced a deal to buy fellow accountancy software developer CSM. Pegasus will pay #6.7 million for the Birmingham-based company, comprising #4 million in cash, #2.1 million in shares and 600,000 in loan notes.
The deal would appear to be a good fit. Pegasus sells accountancy solutions to the mass market, while CSM's core business is with specialist professional accountancy practices. CSM was founded in 1979 and is currently a subsidiary of monitor manufacturer Microvitec.
The proposed acquisition is awaiting approval from Pegasus shareholders, who will vote on the issue at an extraordinary general meeting on 14 April.
Tate Bramald Consultancy, a research firm specialising in the accountancy software market, said CSM had a 25% market share in 1994, the most recent year for which figures are available. The company's applications deal with personal and corporate taxation, and practice management.
"There's a synergy between us," explained Chris Leak, sales and marketing director at Pegasus. "Their target market are the auditors of our customers.
Their customers are major influences on our customers, who ask advice from their accountants when deciding what accountancy software package to invest in."
He added: "This helps us grow our business, gives us a good grounding for future growth, and also will help CSM to develop its business."
Peter Mart, CSM's managing director and co-founder, commented: "We have no doubt that this move is in the best interests of our customers, staff and business partners."
Both companies will continue to operate from their respective headquarters, with CSM run as a separate subsidiary. Mart has agreed to stay on with Pegasus, and there are no plans to lay off any of CSM's 80 employees.
The CSM brand name will also be retained.
Pegasus' move came as the company published its results for the 12 months to 31 December 1996. Turnover was up 23% to #7.9 million and profits before tax jumped 51% to #1.3 million, despite a takeover approach by Sage. This cost #185,000 and "a lot of management time", complained Pegasus' Leak.
"We were not very happy about it as it deflected us from what we are paid to do."
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