11 July 2003 SunGard Data Systems, a leading provider of software and disaster recovery services, has announced that it is acquiring UK rival, Sherwood International for $105 million in cash.
Rumours of a potential acquisition surfaced in early July following the failure of Sherwood’s management team to execute a management buyout that would have valued the company at just over £50 million.
Sherwood has undergone a series of re-organisations since the appointment of Mike Shinya as CEO in September 2001. The company restructured its operations and then pulled out of the outsourcing services market to focus on developing, selling and maintaining insurance software.
As a result of those moves Sherwood, reported an operating profit before exceptional items of £4.6 million for the year to December 2002 on a total turnover of £52.2 million. But the company had been suffering from falling licence sales in recent months and admitted that trading conditions had deteriorated.
SunGard says that it started looking at Sherwood six weeks ago when it became clear that the MBO was not going to go ahead. The company, which has made more than 100 acquisitions over the past 20 years, is particularly keen to broaden its product portfolio. More than half of SunGard’s turnover, which totalled $2.6 billion in the year to December 2002, comes from financial software sales, including insurance software products.
Commenting on the deal, SunGard said, “Combining these two insurance systems businesses creates a single product offering to financial services companies worldwide of a comprehensive range of insurance and benefits products.”
Directors at Sherwood said they believed the offer, equating to 140p a share, was “fair and reasonable” and recommended the sale. Although Sherwood’s shares were up to 139p yesterday as a result of speculation about the deal, they had been as low as 37.5p in October.
Moreover, analysts said that market conditions in the insurance and pensions industry continue to be difficult and that it is likely that Sherwood would have had to release more bad news in the months to come, which would have knocked its share price.
Ken Andrew, non-executive chairman of Sherwood, said: “Over the past few months, we have been considering all strategic options for the company. It is the opinion of the Sherwood directors that the offer from SunGard is in the best interests of Sherwood shareholders and will allow Sherwood to be better able to build greater scale, achieve its growth aspirations and enhance its global offering as part of a much larger entity.”