The UK’s Blue Prism (PRSM:AIM) has agreed to a final takeover offer from private equity firm Vista Equity worth £1.22 billion. But this might not be the knockout blow, as today’s 6% share price rally to £12.90 implies.

Vista called its latest offer ‘final’ and ups the cash deal to £12.50 per share, trumping the rival £12 cash offered by US software firm SS&C Technologies. Vista had kicked off the chase for Blue Prism in September when it tabled an opening £11.25 per share bid.

The battle for Warrington-based Blue Prism, Britain’s leading robotic process automation specialist, has so far increased the deal value by £220 million but it remains to be seen if this will be enough to satisfy dissenting shareholders.

The possibility of a takeover was one of the chief reasons why Shares flagged Blue Prism as an investment opportunity in July 2021 at 778.5p.

Activist investor Coast Capital, which has supported the US-based SS&C’s proposal, raised valuation objections over the initial Vista bid believing that it undervalued the UK firm.

Vista’s latest offer may win over Coast Capital and other investors hoping for more, although the deal has so far received only 18% acceptances, presumably including the 6% and 4.75% owned by chairman and chief executive Jason Kingdom and founder Alastair Bathgate given the board recommendation.

INDUSTRY BUYER ADVANTAGE

Subscription-type tech business have proved to be popular with private equity firms, which are drawn to the stable revenue streams their recurring revenue models generate. Blue Prism’s recurring revenues are more than 90%.

However, the lack of operational and cost synergies can leave private equity buyers hamstrung and give the advantage to a trade buyer, such as SS&C. It is a provider of financial services solutions, an industry where Blue Prism earns a large chunk of its sales.

This could see SS&C or another software peer looking for a jumpstart in the RPA industry could yet emerge. SS&C has until 5pm on 2 December to improve its own offer or walk away.

Blue Prism’s board has called a 9 December shareholder meeting to vote on the Vista deal.

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Issue Date: 26 Nov 2021