SNP Schneider (DE:SHFG) has acquired an initial 90% shareholding in Harlex Management, which owns 100% of Harlex Consulting, based in London, UK. Harlex specialises in SAP data migration (essentially transformation) projects. The acquisition gives SNP a physical presence in the UK, and hence a stronger position to target and deliver new business in the UK. Activity remains very brisk at SNP and in September it won a record $10m+ contract to combine the IT landscapes of two US chemical companies (we assume Dow Chemical (NYSE:DOW) and DuPont (NYSE:DD)) that are merging. Given SNP’s strong market position in software-based transformation projects, we believe the shares are attractive on c 19x our cash-adjusted FY18e EPS.
Acquisition of Harlex Consulting
Founded in 2010, Harlex specialises in SAP data migration (or transformation) projects and related process consulting (including setting up SAP systems). Harlex is a gold service partner of SAP in the UK and was named in the 2016 Sunday Times Hiscox Tech Track 100 listing of Britain's fastest-growing private technology companies. The business has grown from two to 25 full-time employees in five years, including 22 consultants, and it also uses outside consultants. Its 25 customers include blue-chip names such as Sony Music, Thomson Reuters, Henderson and BAE. Harlex does not use a software methodology and in future its consultants will use SNP’s T-B. Previously, SNP has delivered UK projects from its offices in Germany, eg a Rolls-Royce (LON:RR) carve out, and SNP also has UK partners (ie resellers). Harlex generated revenues of £4.83m (c €5.6m) in the year to September 2015. It is comfortably profitable with EBIT of £0.79m (for an EBIT margin of 16%). We estimate that SNP is paying around 1.1-1.2x revenues for Harlex.
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