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You’ve got to like Active Risk (LSE:ARI) as an investment. People liked it so much today that its share price grew by more than 50% on trading of only 1.076% of its outstanding shares following the announcement of its impending acquisition by Sword Aquila Ltd. By early afternoon the share price had risen 11.5 pence to 34.00.
You’ve got to like this acquisition for several reasons.
- Active Risk’s business is all about Enterprise Risk Management (ERM).
- Sword is a provider of IT services & solutions and communications.
- The combination of these service under one corporate logo should drive the growth of the Sword Group by adding a risk management service that undergirds its present offerings.
- Both companies already have a substantial client base and partner with the world’s top firms.
- Both companies have solid relationships with government and military entities. Forty-five percent of Sword’s business is within these sectors.
When one grasps the service that Active Risk provides, there has to be a sense of security in the risks it it willing to take. The ARI website describes it’s spectrum of services as
- Driving predictability in project risk management
- Supercharging performance with operational risk management
- Boosting confidence with governance and compliance
- Accelerating growth with opportunity management
This should be a marriage made in Heaven. Actually, it will take place just like all M&A do, but there is an inherent beauty in this proposal.
- It will be a cash acquisition.
- It will be consummated without creating debt.
- The dowry is 35.2 pence per share for all issued shares. Don’t bother reaching for your calculators. That’s a 56.4% premium on the 10 July price of 22.5 pence at closing. It’s also a 63.8% premium on the weighted average of the ARI share price for the three month period preceding 10 July.
- The ARI Board is expected to unanimously support the deal.
- Sword Aquila (the acquisition entity of Sword) has already received “irrevocable undertakings and letters of intent” from shareholders representing nearly one-third of its outstanding shares.
- ARI shareholders are ecstatic at their windfall.
- It is unlikely, in my humble opinion, that there will be any redundancies, but quite the opposite, that the marriage will breed new opportunities.
This is one of the few truly synergistic acquisitions that I have ever studied. “Synergy” is a word tossed around in the business world like “love” is at the local watering hole near closing time. But that doesn’t mean that real love does not exist. And it doesn’t mean that real synergy doesn’t exist either.
Sword Chairman, Jacques Mottard, observed that “Active Risk has a strong product, with a diverse customer base, which will provide wider commercial and development potential to Sword Group, strengthening our governance, risk and compliance offering.” That sounds a lot like what I said!
From the ARI perspective, Executive Chairman, Lynton Barker said that “We firmly believe that this offer delivers good value for our shareholders and, moreover, that being part of the Sword Group will provide the scale, diversity and financial resources necessary to assure long term sustainability and opportunity for our staff and customers.”
Well, it looks like we all agree. What are we waiting for? Let’s go and congratulate the happy couple!
