Jim Armitage: Debt-laden and pricey, beware Misys' private-equity flipComments Off on Jim Armitage: Debt-laden and pricey, beware Misys' private-equity flip
I don’t doubt that having Misys in the FTSE 100 will be a boost to Britain’s tech scene, particularly with the departure of ARM.
But patriotism aside, at this price I don’t want my pension fund to pile into the shares.
Vista, the private-equity wizards selling the business from their Cayman Islands haven (Theresa May, take note) are asking us for £5 billion-£5.5 billion. That’s over £4 billion more than they paid us for it four years ago.
Either the sale in 2012 was the dumbest deal ever, or we’re being fleeced. I lean to the latter.
Yes, Vista invested in Misys along the way, buying a chunk of Thomson Reuters for £1.2 billion. But, for all management’s talk of their personal genius and favourable changes in the finance industry, surely that hasn’t created this much extra value. And, though Misys might be good at servicing its legacy IT contracts, it’s not a supercharged grower like ARM.
There’s another thing: typically for a private-equity flip, Misys returns to the market leveraged to the hilt. In its final filings before disappearing into Vista’s maw, Misys recorded debts of £107.8 million, 1.7 times its underlying profit. Today, its debt load has surged to more than £1.3 billion.
Even after it spends £300 million of its new float investors’ money paying that down, it will still represent 3.5 times profit. With all that debt to service, how will Misys be able to invest enough in R&D to keep itself ahead of the opposition?
As if that weren’t enough to make you squeamish, there’s the fact that the directors and Vista have decided it’s time to sell, albeit only part of their stakes. To quote chief executive Nadeem Syed, this is a “partial monetising event”.
Partially monetising for him, certainly. Perhaps not for us.
Scribble, don’t quibble
SCEPTICISM about the Misys float may not be matched by analysts at the City’s big banks.
Making millions of pounds in fees, either as bankers, co-ordinators or bookrunners are: Goldman Sachs, Bank of America Merrill Lynch, JPMorgan, Morgan Stanley, Barclays, Credit Suisse and Deutsche Bank.
How many 20-something scribblers in their research departments will be willing to rock the boat?
Get quids in, Lynn
SVG’s Lynn Fordham has properly sent HarbourVest packing. Good riddance to an ill-mannered, underpriced, hostile bid. Goldman’s white knight offer may be some way shy of the 700p a share investors hoped for, but it still spanks opportunist HarbourVest, and is tidier than the piecemeal alternative on offer yesterday. Time to take the cash.