Consultancy and ERP software provider K3 Business Technology has bought the Sage 200-focused business unit of reseller FD Systems for £1.25m.
Some £950,000 will be payable on completion of the deal, with the balance due end of February. The buy is the second acquisition of the same type made by K3 in as many months.
Andy Makeham, chief executive of K3, said in a statement to AIM that the acquired unit will blend easily with its existing Sage business.
“Importantly, the acquisition brings us additional annual recurring income and very good cross-selling opportunities,” Makeham said.
“The acquisition materially increases the number of Sage customers we have under maintenance, and as we seek to unroll K3's hosting and managed services offering across our existing 1,500-strong customer base, the addition of this new customer base increases our readily addressable audience.”
The purchase follows K3’s £1.7m acquisition last month of Hampshire managed services provider Panacea, which similarly focused on Microsoft-based ERP for supply-chain customers.
“K3 management views the [Panacea] acquisition as a material development in the growth of its managed services and hosting activities,” K3 said at the time.
“For the year to 31 December 2008, Panacea generated sales of £9.58m and an underlying operating profit of £0.57m. Some 47 per cent of [its] annual revenues are recurring.”
K3 is looking to further develop its hosting and managed services operations, which it believes are crucial for future growth. Prior to the FD Systems buy, K3’s contracted recurring revenue accounted for about 40 per cent of the latter’s annual revenue, Makeham added.
The group supplies and supports ERP software to supply chain players.
Cardiff-based FD Systems’ Sage 200 business unit delivered the Sage Line 200 suite of business management software for SMBs. According to K3’s AIM statement, the unit was bringing in £2.35m in revenue a year, and contributing half a million pounds in profit.
About 40 per cent of the unit’s annual income was also recurring revenue – generated by licence renewals and support. It had around 330 customers.
Analyst firm TechMarketView said the deal should be a “nice little earner”.
“We see huge opportunity for established mid-market ERP software players like K3 to take clients ‘off premise’ with their tailored business software and hosted offerings,” the firm wrote in its daily newsletter.
Channelweb.co.uk called K3 for further comment on its acquisition strategy but the company had not yet replied at press-time.
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