Staffordshire software firm acquired in £9m deal

MIDLANDS based software supplier Dynamic Change has been acquired in a £9m deal by rival Allocate.

Dynamic Change, which employs 44 people and is based at Keele Science Park, provides business management software to the UK healthcare market.

The firm, which has seen its customer base grow to 125 clients, derives 70% of its £3.2m revenues from contractually recurring from subscriptions. These have grown by approximately 40% over the last financial year.

The deal, which is being financed over three years, comprises an upfront consideration of £4.9m in cash plus £100,000 in shares.

Allocate has used cash balances and receivables of approximately £1.6m, largely reflecting deferred income from subscriptions paid annually in advance.

It will pay out a further £4m if Dynamic Change achieves a 25% compound annual growth in run-rate subscription revenues in the three year period to March 2013.
 
Allocate said the deal was expected to significantly boost earnings within its first full year of ownership, with high levels of recurring income.

The company said it believed there was also significant potential for growth within the UK healthcare market, through new customer wins as well as continuing to develop existing customers.  

Allocate could also use its global exposure to take the Dynamic Change platform into new international markets.

Dynamic Change, founded in 2001, has developed the Performance Accelerator software system, which is used by customers to monitor and manage regulatory compliance, corporate governance, business objectives, risks and controls, performance indicators and financial targets.  

Allocate, which provides software packages to health, education and other public sector organisations, said Dynamic Change’s customer base was highly complementary to its own – which includes 230 healthcare organisations.

Key members of Dynamic Change’s management team are expected to remain in place after the acquisition.
 
Ian Bowles, Allocate chief executive, said: “With this acquisition we continue to broaden Allocate’s application portfolio for the healthcare sector which will now include regulatory compliance corporate governance, risk and performance management.  

“We believe this is an attractive opportunity to achieve additional visibility in our top-line growth and increase our recurring revenue base.”
 
Mil Milojevic and Hugh Ashley, founders and joint managing directors of Dynamic Change, said: “The strategic fit between Allocate and Dynamic Change is excellent for both customers and staff.  

“Regulatory compliance and business intelligence are rapidly emerging as some of the most exciting areas of the software market for healthcare and the enlarged group is well positioned to exploit this opportunity.  We look forward to contributing to Allocate’s continued strong growth.”