Xchanging plc (‘Xchanging’), the business process, procurement and technology services provider, announces it has agreed to acquire 100% of the spend analytics company Spikes Cavell Analytic Limited (‘SCAL’), for a total potential cash consideration of up to $11.5m on a cash free, debt free basis (the ‘Acquisition’). The Acquisition is subject to certain customary closing conditions and is expected to complete by the end of March 2015.
SCAL is a British company which provides spend analytics technology and services mainly to public sector institutions in the UK and higher education authorities in the USA, but also increasingly to the private sector. Based in Newbury (UK) and Virginia (US) and with 35 employees, SCAL brings to Xchanging a portfolio of c. 60 existing lead customers, some of whom represent groups. SCAL had revenues of £1.8m for the year ended 31 March 2014.
Spend analytics is an important diagnostic tool for customer due diligence in determining spend savings and is frequently included within wider procurement engagements. Spend analytics also provides a way for measuring spend in order to manage supply chain risk and assist organisations in assessing their compliance with diversity programmes. SCAL is also pioneering analytics services that benchmark an organisation’s competitiveness against its peers.
The Acquisition fits Xchanging’s strategy to differentiate its products and services through technology-enablement. Within Xchanging’s Procurement business, the SCAL technology will augment its existing MM4 platform, enabling MM4 to achieve ‘full-suite status’ in the sourcing technology sector.
The SCAL technology, like the MM4 technology platform, can be offered both as a stand-alone Software-as-a-Service (SaaS) product as well as part of a bundled offering within our Procurement-as-a-Service (PaaS) offering. SCAL’s low priced entry point option further enhances Xchanging’s opportunity to grow its customer base through cross-selling.
Of the total potential cash consideration, $6.75m will be paid on completion of the Acquisition, and up to a further $4.75m will be payable over the next two years, subject to certain operating performance targets.
Ken Lever, Xchanging’s Chief Executive, commented: “Increasingly organisations are recognising the major savings that can be made by using technology to enhance their procurement strategies. Our procurement business went through a significant transformation in 2014, building on the impetus of the MM4 acquisition, made in late 2013, which brought a core technology platform. It also opened up the business to accelerated client acquisition by increasing the number of lower price point offerings. SCAL contributes to this strategy and further enhances our technology capabilities.”