Pick of AIM by Miles Nolan 

The decision by Hewlett-Packard to pull out of hardware and splurge £7 billion on FTSE 100 software firm Autonomy certainly grabbed a number of headlines over the summer. However, the move is not unduly surprising given the increasing consolidation that has been taking place, particularly led by US companies.

In March, IT giant McKesson snapped up System C Healthcare for £87 million – then, a month later, it was the turn of marketing software firm smartFOCUS to be acquired by technology investor Francisco Partners for £25.3 million. Group NBT also recently succumbed to an attractive 550p-a-share offer from private equity player HgCapital, which valued the domain name specialist at £153 million.

With the UK an innovative source of technology companies, the question is – who might be next to fall prey to a suitor?

Getting the lowdown
At Growth Company Investor we regularly interview and meet management, with the pace speeding up markedly through reporting periods. One firm that recently stood out was Bradford-based Atlantic Global at 25p. Having joined AIM back in 2001, it is a veteran of the junior market – but perhaps not for much longer.

As a specialist supplier of integrated business and resource management, it has a customer base of 120. However, it has been spotted by two potential suitors, both of whom have submitted ‘preliminary expressions of interest’. Though Atlantic believes it has a secure future as an independent entity, the approaches have forced it to raise the white flag and conduct a formal sale process via­­­­ ICON Corporate Finance.

Trading conditions remain competitive, but in the six months to June it still achieved a 57 per cent hike in pre-tax profits to £33,000, as sales fell 3 per cent to £703,000. Of more interest is the cash balance, which at a shade over £2 million equates to 9p a share – not bad when compared with a current share price of 14.5p.

Broker Daniel Stewart predicts 2011 pre-tax profits of £500,000 and EPS of 1.4p. Shares in Atlantic are an each-way bet on either a takeover or the firm gaining more traction in its markets.

A clear target
Another company worth highlighting is software solutions minnow Clarity Commerce Solutions. The AIM counter has fallen on hard times, largely due to significant order delays for its kit. Though Clarity has secured new business, in the year to March it swung to a loss of £1.4 million (2010: £1.4 million pre-tax profit) as sales edged up a touch to £19.9 million.

The slump in its share price has allowed newly formed Enigmatic Investments to launch an opportunistic cash bid at 23p a share. This was a 51 per cent premium to its previous closing price, and has the 9 per cent holding of Enigmatic behind it.

Chief executive Ken Smith has quit, and the board of Clarity has rejected the offer as ‘highly opportunistic’. Having recently acquired EPOS developer DigiPoS, the rationale for the deal lies in cross-selling, cost savings and an enhanced product offering. For now, investors have little choice but to sit tight.

Once known as Intelligent Environments, AIM-listed Parseq develops solutions for a raft of clients including 02, Experian and Barclaycard. Last year it raised £4.5 million at 7p a share, at the same time as reversing mobile and online business Documetric into the group. It then went on to pick up business process outsourcer Avance for £600,000.

CEO Rami Cassis has pitched up with a 7.5p a share cash offer, backed by Nova Capital and HarbourVest Partners. Under new takeover rules, it has to make an offer or walk away by 17 October.