Acquisitive Real Software Group NV, the Aartselaar, Belgium-based IT services and software company, has paid $773,200 for a 49% stake in internet start-up Hotrate.com to strengthen its e-commerce capabilities, and has taken a 51% stake in Luxembourg-based software and services outfit Proget Group for around $13m. Real says its holding in Hotrate.com, which focuses on the business-to-business and business-to-consumer e-commerce market, will be increased to over 60% in 2001.
These latest takeovers follow the announcement that Real Software is set to merge with Tava Technologies Inc through the acquisition by Real Software of 100% of its shares for roughly $190m. The Englewood, Colorado-based company provides consulting, systems integration and outsourcing services and recorded revenue for the nine months ending March 31, 1999 of $76.4m. The merging of the two businesses is described as friendly. Real Software recently reported results for fiscal 1998 that show a tripling of revenues to 129m euros ($133.6m). The Tava tie-up delivers Real Software a substantially increased presence in the US. Tava has 19 offices across the US, a head count of 660 and a broad client base of Fortune 1,000 companies.
Real Software floated on the Brussels stock exchange in June 1997, something that triggered a series of takeovers. The company’s growth in 1998 was the result of no fewer than ten takeovers. These acquisitions accounted for 47m euros ($48.6m) of the group’s total 1998 revenue. When it takes over other businesses, Real Software tends to pay about 10 to 12 times net profit. We also insist on a controlling shareholding of 51%, said Rudy Hageman, President Real Software.
Hageman believes that if a company has too much of a dependence on products and licenses, it makes itself vulnerable to economic cycles and competition. On average, margins are somewhat lower for services, but the income they generate is much more stable, states Hageman.
Targeting key sectors in the financial, pharmaceutical and healthcare, automotive, retail, distribution and logistics industries, with applications in supply chain planning, e-commerce and ERP, Real Software now has a presence in France, the Netherlands, the UK, Luxembourg, Switzerland and Germany.
Hageman has a growth target for the current financial year of at least 50%. All the companies we have taken over are currently growing faster than we expected at the time we acquired them. In terms of operational margin, we are aiming at more than 17% for 1999, comments Hageman.
In March of this year, Real Software acquired a 54% majority stake in Software Decisions Limited a London-based software and IT services business specializing in the containerization logistics sector. This followed the purchase of a 53% stake in January 1999 of Southampton, UK-based Shire Systems Ltd, a company specializing in computerized maintenance management software. These two buys, together with the 1998 acquisition of pharmaceutical systems software vendor Eider Computers Ltd, enabled Real Software to create a UK-based services organization. The new business unit will also act as a European provider of ERP-solutions for the group.
Revenue for fiscal 1998 showed a jump of 222% on the previous year. In 1998, 55% of the group’s revenue was derived from outside Belgium, with the US accounting for 21% of the total. Operating profit margin (EBIT margin) fell slightly to 17.3%, down 1.8%. This is attributed to structurally lower margins in a number of the companies that were taken over in France and the US, says Real.
The Tava deal brings the total number of employees to about 2,450. In 1998, staff turnover was reported at 15%. The group hired some 600 new computer engineers last year and spent 2.4% of its revenue on training and specialist education programs. Real Software offers IT solutions (products and services) based on its own products, tailor-made solutions and consulting services for third-party product implementations, such as SAP.
In 1998, custom solutions accounted for 29.5 % of its revenues, third-party products and services contributed 30.7 % towards the total, and sales of its own software amounted to 10.3 %. Services related to its own software accounted for 23.3 %, while the remaining 6.2% of revenue came from hardware solutions. Real Software has a 300-strong team of SAP consultants and programmers. In January 1999, the company introduced its own ERP product, ReMax, aimed squarely at mid-cap companies.
