PSINet Europe sold for a song to consortium

When it filed for Chapter 11 bankruptcy protection in the US in early June 2001, Internet service provider (ISP) PSINet earned its place in history as the most dramatic casualty of the dot-com era. Analysts had argued that with revenues of nearly $1 billion, PSINet had no fundamental problems in its core ISP business. Rather, its downfall lay in a rampantly ambitious expansion strategy


InterX: the final days

InterX, once a high-profile UK-based content management software vendor that took on the likes of Vignette and Interwoven, finally gave up the ghost in May when The Innovation Group (TiG) stepped in with an offer of €13.2 million. The deal comes after two years of dwindling sales at InterX that resulted in huge losses and a switch of strategy to portal software.

A UK-based provider of software for the global insurance sector, TiG will pay €2.1 million up front — €6.3 million over the next two years and the remainder if enough sales of InterX’s Bladerunner software are booked. In April InterX sold its Net2020 portal software to TiG for €2.1million. Net2020 sits on top of Bladerunner, bringing content and applications together in a unified portal.

InterX users include the Morethan online arm of insurance group Royal &Sun Alliance, Cambridge University Press, and IT news portals and



that pushed the company to debt levels that became unmanageable when the bubble burst.

Since it collapsed, industry watchers have therefore been waiting to see who would go after PSINet assets. In February this year, a rival ISP, Cogent Communications, bought the US infrastructure of the company for a measly $10 million. And in May a rather unusual collection of financiers announced they would be acquiring PSINet’s European assets for €10.5 million.

Given that PSINet Europe’s revenues in 2001 hit €180 million, the consortium certainly struck a hard bargain. Behind the deal were an international group of investors, led by British financier Michael W Stevens. It included Tel Aviv-based holding company, Israel Corporation with interests in chemicals, shipping, oil and energy, advanced technology and communications; ClearBlue Technologies, a data centre operator with 21 facilities in the US and a single facility in London; and technology investment company Infinity Holdings of the UK.

According to the CEO of its telecoms arm, Gilad Shavit, Israel Corporation’s interests are in building “a global portfolio of advanced telecom providers”. In 2001 the group bought Finnish carrier RSLCOM, and believes that PSINet Europe, with operations in 12 countries and more than 600 employees, will give it the pan-European reach it has been seeking.

Another unusual transaction in Europe was concluded in Denmark when Anglo-Dutch IT services giant CMG sold off its entire division there for a paltry EU2 million. In taking on CMG Danmark, UK-based systems integrator ECSoft gains a unit that generated revenues of €7.6 million in 2001 and an operating loss of around €1 million. ECSoft’s own Danish unit contributed 18% of the group’s total revenues in 2001, worth €16.8 million. This deal turns ECSoft into one of the ten largest IT consultancies in Denmark, with approximately 200 employees.

Acquirer   Activity   HQ   Target   Activity   HQ   Price  
Altran technologies IT mgmt &consulting France Arthur D. Little (assets) Mgmt consulting unit US EU61.8m
Anite Group IT services UK Micros Surveys Mobile workforce s/w UK EU12.8m
ECSoft IT services UK CMG Danmark IT services Denmark EU2.0m
Clearblue Tech/Israel Corp Consortium n/a PSINet Europe Internet service provider Switz EU10.5m
Parity Group IT consultancy UK Sx3 Limited (unit of) IT training UK n/a

Acquirer   Activity   HQ   Target   Activity   HQ   Price  
Applied Psych Research Decision intelligence s/w UK Smartlogik Knowledge mgmt s/w UK EU4.3m
Aspen Technology Process industry s/w US Hyprotech Simulation &engineer s/w Canada $99.0m
Business &Decision Bus intelligence s/w France SPSInfoquest BI &CRM s/w UK n/a
Cisco Systems Networking equip US Hammerhead Networks IP performance s/w US $173.0m
Cisco Systems Networking equip US Navarro Networks Ethernet ASIC components US $85.0m
Computer Associates Systems mgmt s/w US Intraware Inc (unit of) Asset mgmt s/w unit US $9.5m
Experian Customer profile info prov UK MCL Software Credit analysis s/w UK n/a
IDS Scheer S/w &IT svcs Germ Seco S/w engineer &svcs Germany n/a
IntraWare AG CRM s/w Germ TPS Labs CRM s/w Germany n/a
Intuit Financial software US Flagship Group Acctng &bus mgmt s/w US $26.0m
Juniper Networks Networking systems US Unisphere Networks Ntwkg equip US $740.0m
Manugistics Supply chain mgmt s/w US Western Data Systems Aerospace &defence s/w US n/a
Mensch und Maschine S/w CAD s/w Germ Open Mind Techs CAM s/w Germany EU9.7m
Microsoft Systems &apps s/w US Navision Enterprise apps Denmark EU1.4bn
The Fantastic Corporation Data broadcasting s/w Switz FirmNET IT consultancy Switz n/a
The Innovation Group S/w for insurance ind UK InterX (assets of) Content mgmt/portal s/w UK EU13.2m

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Ben Rossi

Ben was Vitesse Media's editorial director, leading content creation and editorial strategy across all Vitesse products, including its market-leading B2B and consumer magazines, websites, research and...

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