Those of you involved in, or aware of, the governance of LGfL for some years will recall in 2003/4 the acquisitions and subsequent merger of Equinox and Synetrix by the private investment group Apax Partners. Consequent to the maturing of the relevant investment fund, Apax has moved to realise its investment, and a purchase of Synetrix Holdings by Capita Group was implemented after close of business on Friday.
This 100% purchase of Synetrix could be expected to have material implications for the LGfL community, however both Capita and Synetrix are concerned to give assurances that there will be no detrimental effect on services or commercial arrangements as a consequence of this ‘behind the scenes’ change in ownership.
LGfL management has met directly with the Capita at CEO level to ensure a full understanding of LGfL’s business and constitution, and to represent concerns that existing mature relationships, arrangements and services are not disturbed, but rather that additional resources should be made available to continue to develop and enrich the current service offering.
Full assurances have been given that this is an ‘arms length’ acquisition. It is recognised that Synetrix has a successful business model, that LGfL is a highly valued and respected customer, and there is no intention of interfering to undermine the current successful position of either organisation. Additionally, arrangements are in place to ensure continuity in respect of all existing Synetrix senior management.
Capita Group has a long track record of inorganic growth (growing its business by the regular acquisition of other successful businesses) and this development is in line with that long term policy. In respect to service provision and development in the longer term, the group has substantial buying power and financial strength, and a significant depth of resource in respect to in-house IT professionals.
A recent frank face to face discussion with the Capita CEO revealed a number of points about the group:
• What’s in it for Capita? – strengthens the group’s education/IT offering, seen as particularly of value in a BSF
• Will this lead to higher charges? – policy and practice has been to grow the quantum not the margin (‘Capita has lower profit margins than Synetrix’)
• Reputation is sacrosanct – referencing between customers and potential customers is seen as very powerful
• Values? – high quality services; never ‘rip off’ the customer; respect the relationship.
• Categorical personal assurance – ‘we will not exploit our position’.
LGfL’s contractual arrangements which originate with the contract let to Equinox in 2001, provide a power for LGfL to terminate its contract upon a change of control such as this. Given the mature state of the current service provision, the unequivocal decision last year by the Consortium to extend the current contract to 2012, the recent £5m investment by Synetrix in refreshing the technology in the core network, and the assurances given in respect to there being no detrimental effect arising from this change, LGfL has agreed to waive this power at the present time. As currently planned, a contract review will be put in hand at the end of next year.