The signs are that there could soon be a considerable step-up in merger and acquisition activity in the European information technology services sector. In the UK alone, the value of such deals rose 21% to UKP248m in the first six months of 1990, and it is clear that considerable momentum is already building behind cross-border deals in the computer services arena. Many believe that the sale of 70% of Hoskyns Plc to French giant Cap Gemini Sogeti SA (CI No 1,471) for what has been recognised as a reasonable price – UKP199m – could well open the floodgates for other discussions. The giant Cap Gemini, with $1,100m turnover a year, is clearly the largest and most obviously acquisitive player in Europe, but its relatively little-known compatriate Groupe Concept SA looks set to be involved in a big way too.
Banking
Based in the Boulogne-Billancourt area of Paris, Concept has experienced phenomenal growth, largely through acquisition, that has seen turnover swell from just $10m in 1987 to around $430m last year; profits for 1989 were some $30m, 69.6% up on the year before. With a staff of 4,000 spread over eight countries in Europe, Concept provides packaged and customised software systems and a variety of services for three main customer groups: the banks and financial institutions; large corporations; the accounting profession and small- to medium-sized firms. All Concept’s software is written using an in-house developed vendor-independent language known as SDL and based on the Stuctured Query Language databases and IBM’s Common User Access standards; depending on the installation, the software runs on a variety of machines, including IBM, DEC and Hewlett-Packard minicomputers, all Unix operating systems, DEC and IBM mainframes, and multi-vendor environments. Its SCBF Banking and Financial Institutions arm offers packaged software and customised applications to the financial community, including over 200 French banks and, via the Concept Dati e Sistemi arm acquired in 1988, the Milan Stock Exchange. Turnover for the division as a whole stands at FF371m and is forecast to rise to FF500m in 1990. The Companies and Engineering division comprises wholly-owned SCE, and Technique Informatique SA, in which Concept boosted its holding to 57% in 1988. –
Compared with Cap Gemini Sogeti SA, Concept Groupe is a complete unknown – yet the French computer services company aims to be as big as Cap Gemini is now by 1992. Who is Concept? What is it about? Mark John has been finding out -Products include a number of application software packages for cash management, accounting and group management, as well as customised packages; sales for 1989 totalled $160m, with Technique Informatique contributing $130m. By far the largest division is the accounting and small business management systems supplier CCMC, in which Concept acquired a 70% stake in 1988. With a customer base of 5,000 accountancy firms and 250,000 small businesses, CCMC turned over $207m in 1989 – a figure expected to rise to $240m in this year. As a large, software-oriented systems and services company, where would Concept fit into a European computer services scene characterised by a spate of mergers and acquisitions? The chances of Concept itself being taken over appear small, given the fact that over 44% of Concept’s shares are still safely in the hands of founders apparently committed to swift expansion, while a further 35% are in friendly hands, owned by Batif Developpement, part of the Thomson SA group and a holding company for Thomson CSF’s interests in the services sector. Far more likely is that Concept will continue to bolster its growth by acquisition on the way to its stated goal of six billion francs – $1,120m – in turnover by 1992. According to the company, no dramatic diversification is envisaged – the overall plan is to concentrate on existing businesses, developing internal synergies and creating new ones via acquisition. Currently, Concept has seen sales from CCMC’s accountancy systems activities slacken: however, this has been compensated for by growth in
sales to large corporates, particularly in personnel and payroll systems, support and facilities management – part of the Concept strategy will be to maintain expansion in these areas, both through acquisition and partnerships. Expert systems and engineering software packages have also been targeted as product areas best taken on board by acquiring the product.
UK office
Simultaneously, Concept is intent on shifting around a third of its business outside France, and it sees acquisition as the easiest way to gain stronger footholds in markets such as Italy, Spain, Germany and the UK, where it already has an office. Overall, Concept intends to achieve profitability equivalent to 8% of turnover by 1992 – on the six billion francs figure mentioned above, this would mean a net of $90m. A spokesman for the company, which has just made a successful rights issue involving around 2m shares at $56 each, says that Concept is permanently in talks with potential acquisitions, but stressed that whatever it decides to buy, its primary consideration will be to avoid saddling itself with a company that puts the attainment of that 8% profitability in jeopardy. At the moment, much of Concept’s energy and money is still tied up in consolidating within the group the businesses it acquired through 1988 – businesses that will probably account for more than three quarters of total group turnover for 1990. When these have been properly digested, Concept will be ready to lunch anew.
