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Sanderson cash bid sets up potential for bidding war

The takeover approach for the Coventry-based software company looks far from a done deal

I clearly wasn’t the only one running my slide rule across Coventry-based software company Sanderson (SND:140p) when I suggested buying the shares, at 120p, in my June 2019 Alpha Report ('Capitalising on the digital revolution', 21 Jun 2019). Aptean, a company controlled by US investment firms TA Associates and Vista, has made a recommended cash bid for the UK company which values the equity at £90m, or 140p a share. It’s not difficult to understand why other predators could be circling. In fact, I highlighted Sanderson as a potential takeover target in my initiation note.

Sanderson is a very profitable software business specialising in the retail, wholesale, supply chain logistics, food and drink processing and manufacturing sectors. The company’s proprietary product suite is in such strong demand that no fewer than 800 small- and medium-sized businesses license it. They are loyal customers, which is why the business has a robust recurring contracted revenue stream, and boasts a strong contracted order book.

In the retail sector, Sanderson provides integrated in-store technology; the back-office systems which are so crucial to processing sales and fulfilling customer orders efficiently; and mobile and ecommerce systems that underpin online operations. These solutions are operated from its cloud-based platform, MESH, allowing retailers to cost effectively extend their existing ecommerce capabilities across any device or sales channel including: mobile web and apps; in-store till (EPoS) apps; assisted selling iPads; mobile payments such as Apple and Android Pay; and beacon technology which allows retailers to communicate with customers’ mobile devices for marketing purposes, thus providing them timely and relevant content to increase their loyalty and build brand engagement. This is not just high-tech proprietary software, but it is high-margin, too. Sanderson boasts a gross margin of 75 per cent in its retail division.

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