Word that Eckoh (ECK:AIM) is walking away from a potential £88 million takeover of rival Netcall (NET:AIM) is a blow. The cash and shares deal, mainly shares, was revealed on 25 June, so it has taken just eight days of talks for the holes in the plan to be revealed.

It's a real shame, tying these two similar businesses together makes sense in many ways. Both have calved leading positions providing software and services to contact centres, or call centres as they used to be called. Both have developed high-quality speech recognition software that help callers navigate their route through the contact centre maze quickly and efficiently. Eckoh has built a largely commercial client base thanks to valuable partnerships with BT (BT.A) and Capita (CPI), the outsourcing giant. Netcall's chief customers are in the public sector arena, where it supplies to 700-odd NHS trusts in the UK, among other clients.

Phone payment

The pair also bring something unique to the party too. In Eckoh's case, that's an automated phone payments system. Netcall, in contrast, has developed a very handy business process management system called Liberty, allowing clients to engage with their customers via social networks, webchat and outbound messaging.

[caption id="attachment_53659" align="aligncenter" width="475"]On Feb. 15, 2011, representatives from the University of Wisconsin-Madison Parent Program and Cross College Advising Service team up to host a live informational web chat aimed at academic advising for students and parents. (Photo by Bryce Richter / UW-Madison) On Feb. 15, 2011, representatives from the University of Wisconsin-Madison Parent Program and Cross College Advising Service team up to host a live informational web chat aimed at academic advising for students and parents. (Photo by Bryce Richter / UW-Madison)[/caption]

When Shares spoke to Eckoh CEO Nik Philpot on Tuesday (30 June) he spelled out that integrating these different systems' architecture was unlikely to be be terribly complex, which is not always the case in IT mergers. He also pointed out the added bonus of drawing together some very talented creative staff under the same umbrella, a neat staff acquisition trick worth something in a digital world where the best talent is often cherry-picked by much bigger companies.

So he'll be disappointed that a deal cannot, seemingly, be done. While everyone is staying mum on the identity of the blocking shareholder, you might jump to the conclusion that it is Netcall's boss and founder, Henrik Bang. Not a man likely to be comfortable playing second fiddle in an enlarged company's management structure, perhaps he was not ready to walk away either, not with just over £600,000 of cash in his pocket and a ton of paper. Yet his 3.42% stake suggests he would not have had the sway one his own to thwart the deal.

ECK NET

Which implies that the finger-pointing should be aimed at Livingbridge, the venture capital firm that owns 17.9% of Netcall. This is just supposition, you understand, but built on educated guesses.

The real losers appear to be Netcall's shareholders, its stock price has fallen hardest today on the news, off more than 8% to 50.5p. Eckoh is down just 1.3% to 39.25p, reflecting the near-term growth trajectopries of each business. Eckoh's has been accelerating, Netcall's declining. Which offers hope that a deal is not off the table for good. Don't be surprised if another deal is presented, perhaps with a slightly different shares/cash mix, in the months ahead.


Issue Date: 03 Jul 2015