16th Jun 2008 07:00
16 June 2008
SQS Software Quality Systems AG
("SQS" or the "Company")
SQS Acquires VeriSoft of India
Acquisition further expands global footprint and broadens Off-shore capabilities
SQS (AIM: SQS.L), the global leader in independent software testing and quality management services, is pleased to announce the acquisition of VeriSoft InfoSystems and VeriSoft InfoServices ("VeriSoft"), a group of independent software testing companies based in India. The acquisition is of strategic significance to SQS as it means it is better positioned to benefit from the increasing customer requirement for blended on and off-shore testing solutions. Furthermore, it will allow SQS to provide an improved level of support to its, mainly UK, customers who have located their test management operations in India.
SQS has entered into an agreement to acquire 75% of the issued share capital of VeriSoft with an option to purchase the remaining shares. This will be the fourth acquisition the Company has made since its IPO in September of 2005, including Cresta Group (UK), Triton Management Consultancy (Austria) and Validate Svenska AB (Sweden).
VeriSoft is headquartered in Pune, India, one of the country's leading technology centres, and is a leading provider of software testing and quality assurance in the region, with subsidiaries in the US and the UK. With approximately 150 staff, VeriSoft has completed over 300 testing projects for some 100 customers of which 50% are based outside India. In the year ended 31 March 2008, VeriSoft generated profit before tax of €0.1m on revenues of €1.2m. All of the senior management of VeriSoft will remain with the company following completion of the acquisition, including VeriSoft's CEO Gireendra Kasmalkar, who will become Managing Director of SQS India. In addition, a senior director from SQS UK will be joining the management team in Pune.
The acquisition is a further execution of SQS' strategy to expand and diversify the Company's offshore bases which now include India, South Africa and Egypt as well as a "homeshore" test centre in Eastern Germany at the Polish border. This geographical spreading of resources enables SQS to cater for clients across a variety of cultures, languages and time zones. VeriSoft is particularly important in this respect as it provides a cultural fit with the many global enterprises whose existing offshore operations are already based in India. Furthermore, VeriSoft brings new service offerings to the SQS portfolio, including testing for the computer games and software products industries. VeriSoft currently enjoys strong partnerships with Microsoft, Sony and Nintendo in these fields.
Rudolf van Megen, CEO of SQS, said, "I am delighted to be welcoming VeriSoft into the SQS Group. It is important that we are able to offer our customers a solution that is tailored to their needs and increasingly this involves a combination of off-shore and on-shore services. VeriSoft brings with it an established local and international customer base and additional capabilities particularly in the high growth computer game software and standard package software testing market. We therefore believe it to be an excellent addition to SQS."
Gireendra Kasmalkar, Chief Executive Officer of VeriSoft, said, "Being acquired by the world leader in our industry is a great endorsement of our company. While both the companies are independent testing companies, there is an excellent fit between the two companies due to the off-shore capability as well as new verticals that we bring to the table. Being part of SQS will open up a wealth of opportunities for growth both in terms of offering a broader range of services in our home market and directly exposing us to a much greater market globally."
Terms of the acquisition
The maximum consideration for the acquisition of 75% of VeriSoft will be 121m INR (€1.8m) of which 44% will be satisfied in cash and up to 56% can be satisfied by the issue of new SQS ordinary shares to the vendors (who include current VeriSoft management). Of this maximum consideration, 40m INR (€0.61m) (the "Initial Consideration") is due as a cash payment on Closing and 68m INR (€1m) will be deferred and payable (up to 100% in newly issued ordinary SQS shares) over the two years following Closing, dependent upon the achievement by VeriSoft of specified growth and profit targets. A further consideration of 13m INR (€0.2m) will be paid for a 95 year lease over land that VeriSoft has been allotted in the Special Economic Zone ("SEZ") IT Technology Park in Pune. The SEZ provides a favourable tax status for new work and SQS expects that it will build its new offshore testing centre there over the next 2 years. The acquisition is expected to complete on 1 July 2008.
There is a further option for SQS to acquire the remaining 25% of the shares in VeriSoft between April 2011 and April 2016 for a consideration which is determined by VeriSoft's achieved profit after taxes and SQS' price/earnings ratio at the time, when the option is exercised. This option is exercisable either by SQS or the vendors and 50% of the consideration for the option can be satisfied by the issue of new SQS ordinary shares to the vendors.
SQS has already established a global leadership position for independent software quality management and testing. The Directors of SQS believe that the acquisition will further enhance its position as a global leader and also represents a key milestone in realising the SQS' strategy of providing "location independent" global delivery.
The acquisition is expected to be immediately earnings enhancing. This statement regarding earnings does not constitute a profit forecast nor should it be interpreted to mean that earnings per share of SQS for the current year or future years will necessarily match or exceed the historical published earnings per share of SQS.
Throughout this announcement the exchange rate used for calculating the consideration has been INR 66.105 = €1.
Enquiries:
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SQS Software Quality Systems AG |
Tel. +49 (2203) 91 54 0 |
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Rudolf van Megen, Chief Executive Officer |
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Rene Gawron, Chief Financial Officer |
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Altium |
Tel. +44 (0)20 7484 4040 |
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Nick Tulloch |
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ICIS Limited |
Tel. +44 (0)20 7651 8688 |
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Tom Moriarty |
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Bob Huxford |
About SQS
SQS is the global leader in independent software testing and quality management services. SQS consultants design and oversee quality management processes during software and IT systems development and test the resulting products for errors and omissions.
Headquartered in Cologne, Germany, SQS now has more than 1200 employees across Europe and in Africa. The Group has a strong presence in Germany (Cologne, Munich, Frankfurt, Stuttgart, Goerlitz and Hamburg) and in the UK (London, Woking, Birmingham, Manchester, Belfast), Ireland, the Netherlands, Switzerland, Austria, Sweden, Norway, Finland, Egypt and South Africa. SQS also has a minor stake in an operation in Portugal and a partnership operation in Spain.
With more than 4,000 completed projects under its belt, SQS has a strong customer base including 36 FTSE-100 companies, half of the DAX 30 and nearly a third of the STOXX-50. It supports clients in a wide range of industries, including major corporations such as Deutsche Bank, Deutsche Telekom, Barclays, BP, Boots, Credit Suisse, Volkswagen, and Daimler.
www.sqs-group.com
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