Morse inspects Diagonal acquisition
Corporate VAR bids for consultancy
Corporate VAR Morse has put in a £50.2m offer to buy SAP consultancy and security VAR Diagonal in a cash and shares deal.
Diagonal, which rejected a similar proposal from acquisition-hungry reseller Microgen in June, said it was unanimously recommending the offer from Morse, but that shareholders would decide the final outcome.
"It's not over until the fat lady sings," said Malcolm Gloak, executive chairman at Diagonal.
"Clearly the circumstances that the board and I found ourselves in with the Microgen approach created uncertainty. We did not see any particular merit from a business synergy point of view when it came to Microgen, but we do with Morse."
David Beresford, UK country manager at Morse and a former Diagonal employee, said: "We have been looking at Diagonal for 18 months now. As we've moved away from hardware and technology we've been building our services and consultancy businesses through acquisition, and this is a continuing process.
"We need a big packaged application, and SAP predominates. It also plays to our integration skills, and Diagonal has an impressive customer roster in retail and industry."
But according to analyst Ovum Holway, Microgen, which bought MMT Computing and Imago QA last year, has not given up hope of buying Diagonal.
However, Beresford said Microgen would have to be very brave to go over the heads of the board and founding directors of Diagonal, all of whom have approved the Morse offer.
Diagonal has recorded some disappointing results recently. The company's interim turnover for its first half-year 2004, issued last week, was £24.8m, down from £31m in the first half of 2003, according to Ovum Holway.
Kate Hanaghan, research analyst at Ovum, said: "What Morse will have on its hands is continuing Diagonal's recovery programme. Regardless of how the acquisition works out, that's the first job for Morse."