Dye & Durham Ltd. is taking a breather from pursuing big takeovers after the acquisitive software company’s multibillion-dollar deal to buy Australia’s Link Administration Holdings Ltd. fell through last year.
“Right now we’re focused more on smaller tuck-in acquisitions given the macroeconomic environment,” D&D CEO Matt Proud said in an interview. “We’ve always been very disciplined but in times like this it’s best to be cautious.”
The Toronto company, which specializes in selling software to legal firms particularly in the real estate market, has made 18 acquisitions since going public in July, 2020. That includes a deal it will announce Monday afternoon to buy U.K.-based Insight Legal Software Ltd., a provider of practice management software for lawyers in Britain. Like other recent deals by the company, the value of the transaction is less than $75-million, although the company did not disclose the terms.
Mr. Proud said his company is likely to continue to focus on deals that cost 10s of millions of dollars, not 100s of millions, well into this year. He said the company’s pipeline of potential deals “is pretty active. There are still more than 100 opportunities we’re looking at.”
D&D has made two major purchases among its spate of post-IPO deals: It bought DoProcess LP, Canada’s largest provider of real estate practice management software, from OMERS-owned Teranet Inc. for $542-million in December 2020 and Telus Corp.’s financial solutions business and other assets a year later for $500-million.
In late 2021 D&D announced a third large deal which would have been its biggest yet, to purchase publicly-traded Link, for $3.2-billion. The deal would have transformed D&D into a major global player with Australia and New Zealand accounting for more than half its revenues and expanding its business into financial data products and software for corporate issuers.
But after markets swooned last year the parties agreed in July to a 12.5 per cent cut the deal price. Then last September the UK’s Financial Conduct Authority warned it would not approve the purchase of Link’s fund solutions business, included in the deal, unless D&D covered a shortfall of as much as $451-million related to Link’s role in the 2019 meltdown of an investment fund. When D&D tried to again cut its offer price, Link rejected the move and the deal quickly died. D&D made one last attempt to buy part of Link’s business within weeks but the Australian company took a pass.
Mr. Proud told The Globe and Mail “We gave it our best effort, we thought there was a lot of value to be created” by buying Link, “but at this point it’s behind us.”
D&D has also bought companies in the UK and Australia for close to $160-million each, although Britain’s competition regulator last year forced the company to divest the former, TM Group (UK) Ltd. over concerns it would reduce competition and lead to higher prices for users of real estate conveyancing software. The company hasn’t yet announced a deal to sell TM.
Mr. Proud declined to comment when asked if he was concerned British regulators could take action on D&D’s latest deal since it already owns a legal practice management software vendor there. Unlike in the TM situation, D&D and Insight have larger competitors in the market, Advanced Computer Software Group Ltd. and ATI Global Ltd.
D&D has also faced a backlash in Canada for its strategy of buying up providers of real estate software and then sharply increasing prices, sometimes by hundreds of percentage points. The strategy has prompted dozens of complaints to the Competition Bureau of Canada and a class-action lawsuit.
Mr. Proud said the strategy with Insight is about cross-selling its new services to existing customers, not hiking prices. “We’re not approaching it from that perspective,” he said. “This is more about how we can own more of the desktop and provide more value through enhanced offerings.”
D&D, which earned $482-million in revenue and $269-million in adjusted operating earnings in the 12 months ended Sept 30, has also been hit by a downturn in the real estate market. In late November the company said it would cut an undisclosed number of employees. It also bought back 15.6 per cent of its stock in late 2022 for $150-million after its share price fell to levels not seen since just after it went public.
The stock has since rebounded. It closed Friday at $21.15, up nearly 50 per cent since announcing the results of the buyback on Dec. 22.