Is Tikit really worth the £80 million mentioned in the Sunday Times?

12
Aug
2019

Rob Ameerun

Last week, British newspaper The Sunday Times published a story about telecoms firm BT and its plans to sell off assets to raise funds to boost the rollout of ultra-fast broadband across the UK.

The company has already agreed to dispose of its London headquarters for £210 million and has apparently slapped a ‘for sale’ sign on its legal software division Tikit as well.

According to the story, Tikit is expected to be valued at £80 million.

If Tikit is indeed up for sale, and if BT really expects to get £80 million for it, who would be willing to pay that amount and how was it calculated?

BT acquired Tikit in early 2013 for £64 million, roughly three times the turnover at the time. Accounts for the last year published (2018) show a turnover of £14.5 million. According to the valuation method that BT might have used when Tikit was acquired, the company would now be worth three times £14.5 million—roughly £44 million. That’s nowhere near the amount mentioned in The Sunday Times.

If profit numbers are used for valuation instead of turnover, the end result is approximately the same. The last accounts published by Tikit prior to the acquisition (2012) show a profit of approximately £5 million. BT paid roughly 13 times this figure. Last year’s accounts show a profit of £3.4 million. Multiplied by 13, that too indicates a value of £44 million.

Solely using financial data to value a software company like Tikit—which operates in the niche domain of legaltech—is of course not ideal. It’s difficult to compare financial data over the last eight years, because Tikit became a part of BT during that period. 

Since early 2018, Tikit has once again been managed by legaltech entrepreneur Simon Hill, the man who developed one of Tikit’s flagship products, Partner for Windows (P4W). That was when he was still CEO at legaltech company TFB (acquired by Tikit in 2008).

Hill was one of the three directors at Tikit who sold the company to BT. Under BT management, Hill acted as Tikit’s Chief Operating Officer. Early last year, Hill took the reins again as Tikit’s CEO. Quite soon after that, Tikit’s branding changed and the BT logo disappeared from its website.

With Hill back as CEO, the company has a leader with firm roots in legaltech and a specific focus on the legal industry. Early signs indicate that this focus is paying off, with a raft of new P4W customers signing up. Carpe Diem, the company’s advanced time recording solution for law firms, is also showing significant growth. Product focus has intensified with the formation of a Product Advisory Board, chaired by industry heavyweight Janet Day.

If BT really is planning to sell Tikit for £80 million to raise money for its ultra-fast broadband plans, it is giving interested buyers the upper hand in the negotiations, which will never lead to a situation that this amount will actually be paid.

Interestingly, one day after the Sunday Times published its story about Tikit, it emerged that BT Fleet Solutions had been acquired by AURELIUS Equity Opportunities. As usual, both companies agreed not to disclose the purchase price. However, a story published by FleetNews back in November 2018 hinted that BT Fleet Solutions could be worth £200 million or more.