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NCC Group announces acquisition of US software escrow solutions business
03 Jan 2006
NCC Group plc ("NCC Group"), the independent provider of IT
assurance, security and consultancy services, has acquired the US based
software escrow solutions business of Recall Total Information
Management Inc. ("Recall"), a subsidiary of Brambles Industries plc,
for a maximum consideration of $5.4million (£3.0 million) in cash.
Based
in San Jose, California, Recall's software escrow business principally
focuses on the provision of escrow solutions to software vendors and
software customers, both on the West Coast and throughout the US. Since
its formation in 1984, the business has successfully established itself
as a leading supplier of escrow solutions in the US and is one of the
top five providers in the market.
The business is expected to
report revenues of $1.45 million, including in the region of $1.1
million of annual recurring revenues, in the year to 31 December 2005.
It is anticipated that the business will contribute over $750,000
(£425,000) of profits for a full year, before investment by NCC Group.
The business is net working capital neutral on acquisition.
The
acquisition of the US business marks a significant move for NCC Group
as it looks to take its successful escrow business template outside the
UK and continental Europe and into the US. NCC Group believes that the
model in the US is different from the UK where there is less active
selling but a higher demand for the service.
NCC Group's
experience of US clients, serviced out of the UK, is that they respond
extremely well to its account management approach which in turn leads
to tremendous opportunities to sell in high value verification services
as has been witnessed by the Group's success in the UK. NCC Group will
be implementing the account management and verification testing models
into the US during 2006. In addition NCC Group will be improving the
product offering in the US and will be instituting integrity testing of
all code to further add value to the proposition sold.
The
software escrow business is a more widely established concept in the US
than in the UK and continental Europe. Although there are a number of
operators, the market is fragmented with plenty of growth potential,
particularly in the field of verification testing and providing
services to licensees, areas of notable strengths for NCC Group.
The existing local management team will stay with the business with NCC Group benefiting from their US market experience.
NCC Group expects to publish its Interim Results for the six months to November 2005 during the week commencing 23 January 2006.
Rob Cotton, NCC Group Chief Executive, said:
"The
Recall Escrow Solutions business has the same basic ingredients as our
business model did five years ago. Our experience of developing the UK
market combined with a solid renewals base in the US provides us with
the ideal opportunity to establish a credible presence in the US
market. We have proven expertise of not only exploiting verification
testing to complement our escrow contracts income but targeting
licensees of software to further improve penetration. This is an
exciting prospect for the Group, which we expect will be earnings
enhancing within 2006."
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