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Comment: Confusion and obfuscation as BT moves to sell Tikit

While on holiday last week I got a rather out of the blue email on 4 August from a contact in the legal tech sector saying “BT is selling Tikit for £80m but it’s only worth £43m.” Momentarily putting down my highly intellectual murder mystery book, I thought, ‘BT is doing what?!’

While on holiday last week I got a rather out of the blue email on 4 August from a contact in the legal tech sector saying “BT is selling Tikit for £80m but it’s only worth £43m.” Momentarily putting down my highly intellectual murder mystery book, I thought, ‘BT is doing what?!’

Briefly reaching out to Tikit, I was informed that this was all unhelpful rumour and speculation, so I went back to my fast-paced thriller in the knowledge that if I pretended to be on holiday for long enough it might just feel like the real thing.

Back in the office this week, and my sources confirm, guess what? The Sunday Times journalist who first broke the news that Tikit is for sale isn’t smoking crack after all.

BT, as part of new CEO Philip Jansen’s stated objective to focus on the telecom giant’s core business and build a network for ultrafast fibre broadband, is indeed to sell off a number of fringe businesses, of which Tikit is one.

Tikit sits within BT’s Enterprise division, which was created last year out of the merger of its wholesale, public sector and business units, in what The Register described at the time as “giving its flagging b2b divisions a corporate facelift” and “rearranging the deckchairs to launch the good ship Enterprise.”

It is from this division that on 6 August BT announced that it has sold its fringe fleet management business BT Fleet Solutions to German private equity firm Aurelius.

The predictions are now that Tikit will be acquired by a private equity buyer – The Times excitedly refers to the fact that “bankers expect it to be sold for a premium due to keen interest from trade buyers and private equity firms.” It adds that “Thomson Reuters snapped up legal software business HighQ last month” (did I mention enough times that Legal IT Insider broke that story?) As a very quick aside, when the bloody hell did legal tech become quite so interesting to the outside world?

Hg (formerly Hg Capital), which is hugely acquisitive in this space and known to be looking for further legal tech targets, will be one to watch.

It’s common knowledge that Tikit CEO Simon Hill and CTO Mark Garnish have long been looking at a private equity buyout/MBO – we reported on it most recently here – but this sale changes the goalposts. Watch this space as to how that situation now plays out now.

As to the value of the business and the £80m figure, in 2013, according to official Companies House filings, Tikit’s revenue for the year ending December 2012 was £20.3m – a healthy increase on £18.7m the year before. However, the accounts for the year ending 31 March 2018 show that turnover is £14.5m – down from £17.5m in 2017 – a drop of 17%, which is, as Tikit said in the 2018 accounts, largely due to the end of reselling iManage and transition to NetDocuments.

Gross profit was £8.07m, down 4% on the previous year, which Tikit said reflected an exit from providing iManage services (albeit offset by the focus on selling own products Carpe Diem and Partner for Windows).

BT bought Tikit in 2012 (completed January 2013) for £64.2m at a multiple of 3x turnover.

While the latest accounts for the year to March 2019 will provide a more up to date financial picture, based on the last declared turnover at the same multiple, we aren’t talking anything like £80m. However, that comes with the giant caveat that the sums being pumped into the legal tech sector both in terms of investment and acquisition are hugely inflated. TR paid an astronomical amount for HighQ.

There is also a big question hanging over what, exactly, a private equity firm will buy. One vendor with direct significant experience of private equity investment told me: “If Tikit gets bought by private equity, the PE will be likely to want to ditch the consultancy and only buy the software.” It’s difficult if not impossible from the accounts to work out what the value of the P4W and Carpe Diem business is worth alone or how much they have grown.

There’s not much point in diving into the impact of all of this on NetDocuments until we know more, but it’s worth noting that the Utah-headquartered software provider has been building its London salesforce and has added Nikec to its partner program.

In conclusion? Despite the inevitable surprise when a couple splits, Tikit’s marriage to BT was not made in heaven and there is no surprise that they are to go their separate ways.

Writing about the sale of Tikit to BT in 2012, then Legal IT Insider editor and founder Charles Christian said: “No, this doesn’t mean you now phone David Lumsden if your phone at home doesn’t work (and thank you Geoff Hornsby of HP iManage for being the first to make this joke). What it does mean is that BT is buying sector expertise in the legal and professional services vertical market. AND that Tikit now has the potential to become THE biggest player in the legal cloud, managed services, ICT convergence sector, thanks to BT’s extensive comms network infrastructure.”

That simply hasn’t happened. What started out as an ambition to spend lots of quality time together and have joint interests has never really come off, not helped by the legal sector’s battered faith in BT.

The interesting thing now is what Tikit’s next chapter looks like. I predict it won’t be long before we find out.

BT declined to comment.

12 replies on “Comment: Confusion and obfuscation as BT moves to sell Tikit”

BT will be lucky to get 2x multiple for this slowly waning business. Oh, and, as for you “breaking the story” of the HighQ acquisition – there was a press release put out before you even posted about it. How does that count as “breaking”???

This Orange Rag’we had it first’ obsession appears to have come to the fore since Jezza stepped into the background and let others take the limelight. A sad consequence of amateur journalistic sensationalism or simply a sign of the times? Will there be Orange Rag branded water bottles on the nest series of Love Island?

Actually the Insider has been pulling off exclusives since 1995 when I first launched it – so just get over it and buy our Orange Rag-branded water bottles – you know you really want to…CC

this won’t come as a surprise to most with Tibet’s decline being evident since BT stepped in. Innovation left the building the same day as Liam Flanagan and a couple of legacy systems (Carpe and P4W) have only revenue value at best. twitchy bottom time for NetDocs users.

Bad news for Tikit. PE buy outs never go to plan in LIT. At minimum it means an employee flush out. At most a strategic shift to what the PE firm wants from them which is normally to make the books look attractive (sales high and overheads low) then sell them for a profit. Inevitably this means lower quality products (although Tikits portfolio is confusing to say the least) and a worried set of customers who have been sold a pack of **** of company stability and a clearly defined strategy. If I’d been a recent tikit customer I’d be aggressively looking through my contract for a get out!!!

Couple of points.
Tikit has had a huge impact on the legal scene. The sales and technical staff who have left Tikit over the years have appeared in multiple organisations and it was a breeding ground for really quality staff in the past.
I was really surprised to read the company accounts and would recommend others have a look at them for the hard data they contain. I agree that based on the last published results and using standard metrics they appear to be worth a lot less than before BT bought them and half of the asking price of 80m looks more likely. Also letting the world know you are selling the company is never going to generate the best price.
My final point is having been through the whole iManage/interwoven/Autonomy/HP/ new iManage scene it puts strain on product development, on staff retention in areas like support and PS and it creates customer concerns. I hope Simon gets his wish to get P4W back and if that happens I wish him the best of luck and to paraphrase – “what does not kill you makes you stronger”

Many of us will recall a time when Tikit where as ubiquitous in law firms as, say, IntApp are now. I certainly couldn’t go a month without seeing them at the turn of the century! I know a few people wondered what the heck was going on when they became part of BT, and of course the answer (other than some folks made some money) was that BT expected to use the TFB part of the group to leverage towards being a large ‘cloud’ services supplier to UK legal.

Come the likes of Amazon, Google, Microsoft and others ‘cloud’ offerings and BTs refocus on their core provisions, then Tikit must now seem to be an odd bedfellow for BT. It’s not unusual in such circumstances for large organisations to divest themselves of such bedfellows despite them still being profitable, albeit at a reduced level … and certainly the likes of LexisNexis and Thompson Reuters have not shied away from doing such things.

As far as DMS services revenue is concerned then it’s possibly true to say that there is less available now as more competition exists and firms opt to use ‘cloud’ based DMSs.
However given the number of firms moving from end-of-life PMSs and the fact that services to install ‘the usual suspects’ replacement systems is scarce then it could be quite possible that P4W and Carpe Diem can fill some gaps in the UK market. If so it could certainly give some breathing space whilst Tikit re-focus.

I’ve seen non-legal software companies almost on their death beds before (which Tikit are not), only to re-invent and recover given some time and support. Times will be a little tough, perhaps with some staff losses, but it’s probably better tor Tikit to be divested whilst still profitable so that they can re-focus and regain some innovation.

I for one say Good Luck to them …

if pieces are for sale, wonder who will buy the carpe business. and then encourage all to move to some new place. any wagers?

I echo Geoff’s comment about Tikit breeding quality staff,during my time there it was their greatest asset. A colleague said recently I’ve only ever met ex Tikit staff not any current.Thats a sad indictment of their most valuable asset. BT were utterly clueless from an employee point of view. So I wish my ex colleagues all the best as they are the ones who built the firm’s reputation and will be the ones to lose out the most,especially the DMS specialists.

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