ValueAct Capital, the activist investment fund, is a familiar warrior on the US corporate battlefield, less so in the UK. But for the past year and a bit, it has been gradually increasing its presence at Misys, the British software group that is recovering following a debilitating failed buy-out attempt by its founder in 2006.
Mike Lawrie, appointed Misys chief executive after that bid disintegrated, is a former ValueAct executive. The fund owns 19.4 per cent – a stake it started building after Mr Lawrie took the helm – and its founder, Jeff Ubben, sits on the Misys board.
The relationship is only going to get deeper, judging from yesterday’s complicated deal. ValueAct is underwriting the share placing that helps fund the Misys acquisition of a majority stake in Allscripts, a US healthcare software group. In this case, “underwriting” probably means “buying”: the shares are priced at a premium to the market, which means the US fund will almost certainly increase its stake to 25.8 per cent. No wonder it was Mr Ubben – and not, say, Sir Dominic Cadbury, Misys chairman – who was quoted on the press release lauding the deal and Mr Lawrie’s leadership.
What should British investors make of this? To get the majority of Allscripts, they have to agree to inject the Misys healthcare operation into the US company, along with $330m of cash raised through the placing and debt. Their exposure to financial services customers (the other main source of income for Misys) and, indirectly, to healthcare customers should remain roughly the same. The idea is that by grafting the two complementary healthcare businesses onto each other, Allscripts-Misys will be able to exploit the growing market for software and services sold to medical practices. But two underperformers do not always make an outperformer. The market is fragmented but it also contains some fierce competitors – including Sage, another British software company – which will presumably be happy to make the most of any post-deal disarray.
British investors in Misys at least benefit from a protection that Allscripts’ investors do not have – nobody can accumulate more than 30 per cent of their company without triggering a bid for the rest. For now, the ValueAct double-act is playing well for Misys. The crunch will come if the interests of the US fund and those of other investors start to diverge.