Business process outsourcing firm Liberata IT Solutions, which is responsible for several large government contracts, has devoured Microsoft Gold partner Trinity Expert Systems (TES) in a pre-pack administration.
This came after TES succumbed to pressing cash-flow issues.
Coventry-based TES called in the receivers Deloitte yesterday and a beauty parade took place. A number of bidders were involved in the process, Dermot Joyce, chief executive at Liberata, told The Channel.
He said part of the allure was that "TES has a strong portfolio with Microsoft, particularly around the area of CRM which is a growth area for us".
Liberata has its own data centre – something TES lacked – running managed hosting and cloud services, and sells professional services to clients, two-thirds of which are in the public sector, including the MoJ and Croydon Council.
Joyce said TES had a bigger IT practice, and he plans to broaden the tech portfolio available on Capacity Grid – an on-demand services platform – to include SaaS or virtual desktops, staffers, as well as data services.
"If a customer wants 400 people, fully tooled, a virtual managed service for two years and wants it quick, we can do that," he claimed, in relation to Capacity Grid.
On top of IT, Liberata – which employs circa 1,500 staff – has other products and services focused on finance and accounting, payroll, and property.
It turned over £90.6m in calendar 2012 down from £100.2m in the previous year but has more than £200m in contracted revenues on its books.
Operating profit rose to more than 50 per cent to £8.3m from £5.45m, flattered by a £2m gain from a provision for a loss-making contract that was closed.
Joyce – former CMO at Serco and exec director at Capita – refused to reveal the buy price, which sources speculated was £5m, but said the deal was paid with cash reserves held by Liberata.
BPO firms have multi-year visibility of their turnover and so in theory should have strong cash flow to invest in businesses and projects.
All 330 staff at the Coventry-based outfit were TUPEd across, and the TES brand will remain in place, Joyce confirmed.
Pre-pack administrations are not popular with tech suppliers – for obvious reasons: they often lose money as a result of them.
But Joyce said he had contacted all the major suppliers and would "take care of them", saying that in some instances it shared suppliers "so we have vested interest in maintaining that relationship".
The problems at TES stemmed from the acquisition of Eurodata Systems, which industry sources say cost the management in excess of £10m to acquire, leaving them with a leveraged balance sheet at a time they were expecting investments in the cloud to give it a bigger bounce.
We are told that TES owed nearly £16m to creditors, including £8m to its bank, £3.5m to HMRC and more than £4m to vendors. This was unconfirmed at the time of publication by both TES and Liberata.
In the last accounts for TES filed at Companies House for the year to 31 October '12, revenues jumped to £31.5m from £23.8, but admin expenses soared to £4.2m from £3.7m which pulled down operating profit by £500k on a year ago to £3.7m.
A near £700k fillip from the taxman saw TES net profit rise to £4.4m from £3.17m.
For its part, Eurodata Systems sales grew to £15.4m up from £12m but a massive jump in the cost of sales to £14.6m from £9.7m left gross profit at £822k.
After admin expenses of £3.1m, up £500k on the previous year, the operating loss widened to £2.3m from £329k in 2011.
Eurodata staffing levels went from 129 to 69 amid a restructure as the company's focus was "realigned to product sales and associated services", the director's report stated.
"Due to the change in focus there has been an expected reduction in GP margin in the year," it added. ®