What have Peter Scott and Simon Clark got in common?
While The Engine Group’s chief executive Peter Scott was hitting the headlines yesterday by acquiring the social media agency Jam from the administrators of the sadly defunct i-level (doubtless at a very lowly price – see i-level pays a painful price for taking on £32m debt to fund founder sell-out), a much quieter transaction had just been completed behind the scenes.
On 26 April Engine issued 6,379 of its shares as part consideration for the acquisition of a business called Creator Visions owned by a certain Simon Clark. What Creator Visions does is not readily discernable, but its website suggests it engages in e-commerce and similar technological consultancy. It has made money for Clark and doubtless Engine would like to do the same.
In 2009 Creator Visions’ cumulative profits grew from £1.4 million to almost £2 million and that would have been after paying Clark and the tax man. All that accumulated profit was sitting in Creator Visions’ bank account at the end of 2009 and, unless Clark’s company has spent it since the start of this year, it will form part of the purchase price.
At a guess Engine will not have paid out more in cash than it had to, and so the initial cash component of the purchase price would probably not have been much more than the £2 million sitting in Creator Visions’ bank account (which would make that part of the deal self-financing, assuming the cash was still in the bank account at the date of sale).
So what would the Engine share component of the purchase price have been worth? Engine shares were valued at £290 in 2009 and are unlikely to be worth much more today. On that assumption, the share component will have been worth something in the region of £2 million too, making a total initial purchase price of up to £4 million while costing Engine virtually nothing in precious cash.
What Engine is buying for its money remains to be seen. Clark was the sole shareholder in Creator Visions as recently as last November and the only other board director Bill James left the company as part of the Engine deal. Apparently the company employs or otherwise retains the services of a number of other consultants some of whom might have received a slice of the Engine shares on offer.
The Creator Visions acquisition is one of a series of similar small transactions Peter Scott has completed in recent months, following on the heels of Penrose Financial (see Engine Group may have paid about £4m to acquire Penrose Financial) and augmented yesterday by Jam. If nothing else, it keeps the group profile high at a time when it would be hard pressed to do anything bigger. And occasionally little deals can prove little gems. We shall have to wait and see.
© Fintellect Ltd