As long as UK investors continue to undervalue UK software companies compared with US peers, private equity will continue to try to pick them off on the cheap. Last week, Blancco Technology’s (BLTG) board accepted an offer from US private equity group Francisco Partners. The offer values the data erasure software company at £175mn, a 24.6 per cent premium to its pre-announcement closing price.
Given the offer price is still below the high seen in September 2021 of over 280p, the board's backing of the deal smacks of frustration. Blancco has proved that wiping data from servers and obsolete computers has been profitable work. In the two years to December 31, Blancco’s revenue rose more than 30 per cent and its adjusted cash profit (Ebitda) margin was up 3 percentage points to 33 per cent. Yet, its share price fell 20 per cent over the period and had flatlined this year prior to the bid.
Top 10 shareholder Forager Funds believes the board should hold out for a bigger offer. In a letter to shareholders, it argued that the price should be at least 30 per cent higher than Francisco’s offer. It pointed to the margin, which it expects to keep growing, and the big discount the company currently trades at compared with international peers.