MENTEC CASE STUDY

Luck happens when Opportunity and Preparation coincide

Kevin Haverty : Introduction

Working in IT industry since 1980

Software Developer

Sales Management

CEO of Mentec 2000 – 2006

Independent Business Consultant since 2008

Director of Unit 4 Business Software Ireland

Mentec Background

Founded in 1978 by Dr Mike Peirce, (TCD)

Mentec “Group” had become a successful but diversified

operation with processor design, hardware distribution and

application software revenue streams.

In 2000, the company was split into its separate components.

I was appointed as CEO to Mentec International Ltd, the

software services.

The Challenge

Shareholders were looking for value realisation.

Business was profitable and cash generative, but ...

“Legacy” products

Overly dependent on home-market (ROI)

No clear strategic (long-term) direction

Heavy overheads

“Life-style” business?

Challenge : How to “Realise” value? We needed a strategy

Strategic Approach

5 year strategic plan

Worked with independent consultants in building the

strategic framework

Clarity re shareholder’s exit goals

Customer and industry feedback

Realignment of executive management goals

Documented Plans

5 year Plan

Key Objective:

Achieve tangible shareholder “value” in 5 years

Options to include :

MBO,

Trade sale,

IPO on AIM,

Merger.

Our Focus

1. Get organised : Management Structures and

Operations

2. Tidy up / strategise our product portfolio

3. Align with a global partner (Microsoft)

4. Develop international services

5. Create IP

6. Become more visible

Strategy Implementation

1. The plan was documented

2. Operational planning Provided a clear focus with frequent reviews

Capability planning

Management and shareholder communications and trust.

3. Horizon Planning Tidy Up - Microsoft – Export

4. Sense of a journey

Examples of some key actions

Management Tidy Up Microsoft

Share Option Scheme Exited non-strategic lines Acquired local MS VAR

Board Formality • Hardware Build real MS partnership

Financial Reviews • Legacy s/w Transitioned s/w dev team

Expert Advisors • Non-MS lines

UK Business IP Visibility

Worked with Ian Shearer

on UK acquisition

Developed “apps” for

partner products

Invested in marketing and

“brand” development

Purchased business in

London & East Midlands

Set up a Microsoft ISV Worked on our PR

– published wins etc

Integration was not trivial EI R&D programs & project

funded

IBEC (ISA) involvement

Result

Various opportunities were considered including

MBO

Merger with another Irish software services business

But most realistic opportunities were coming from

potential acquirers

In Dec 2006, Mentec was acquired by Calyx Plc,

then listed on AIM.

The Acquisition

Very fast negotiation & due diligence.

All cash deal – paid over an 18 month period.

Confidentiality was maintained up to day of signing

Key executive management remained in place.

Significant opportunity for Mentec to be the first software services element of a rapidly growing multi-national operation.

Integration was challenging as Calyx moved from Public to Private in early 2007.

Views on Exit Strategies?

Every case is unique.

Financial results should be consistent with your

“story”.

Be Prepared Always

Strategic direction must be crystal clear

Have your presentation ready to roll and up to date

Logical, straightforward and compelling story

Good house-keeping will help

Ensure shareholders are “on board”

Views on Exit Strategies?

Visible management structure and team

Why are your key people loyal?

The devil is in the detail (contracts etc..)

Just like selling product, must know

your target “sweetspot”

your USPs

and your “BATNA”

Use expert advice (Financial, Taxation, Legal, M&A)

Finally, ...on being acquired

Not easy for managers who remain on board

Caught in the middle

Challenged by new owners and your own people.

Don’t assume the acquirer will have all of the

answers when integrating your operation.

Expect change, both good and bad.

Thank You

Mobile : 087 2865638

Email: kevin.haverty@kha.ie