Dublin-based payment software company Flexicom has opened discussions with a number of companies with a view to a trade sale, The Irish Times has learned. Trintech, the Dublin based e-commerce payments company, is believed to be among the interested parties.
It is understood Flexicom has had discussions with five companies with similar operations, and has reached a "delicate point" of negotiation with two public companies. One is a US-based payment software firm, while the other is a European e-commerce payments company. Discussions are believed to be at a very early stage, and no outcome is expected for at least three months.
Industry sources have indicated that Trintech, the secure payments software specialist, may be interested in acquiring Flexicom. However, Trintech executive chairman Mr Cyril McGuire denied discussions had been opened between the two firms. Flexicom was founded by former Trintech engineering manager Mr Pat Shiel in 1993.
"We obviously did a follow-on share offering recently with a view to making acquisitions and as we are constantly looking at a number of parties it would make logical sense that Flexicom is on the Trintech radar," Mr McGuire said.
Flexicom, in which Eircom paid £8.2 million (€10.4 million) for a 31 per cent stake last November, has recently lost a number of key senior managers, including marketing director Ms Orla Brannigan and its head of development.
A bonus scheme which failed to adequately lock in employees beyond the end of February is also thought to have contributed to a substantial outflow of staff. Once the 17.5 per cent bonus was paid a number of employees left for other companies, according to sources.
This, coupled with the relocation of Flexicom's sales operation to the UK, resulted in an attrition rate of around 20 per cent - twice the industry norm.
The company currently employs 78 people, having started the year with 83 employees. Such figures are not in keeping with the general software industry experience.
Flexicom chief executive officer Mr Matt Carty said: "Companies of our size, if they want to expand globally, must recognise the need for local partnerships which offer localisation and customer support expertise."
He added that Flexicom would be keen to enter the US electronic payments market with a suitable partner, and it could in return offer that partner an entry point to the European market.
Flexicom has not ruled out the possibility of a merger-type outcome to discussions, possibly resulting in a stock payment to Flexicom. Eircom, which currently holds two seats on the Flexicom board of directors, is involved also in all the discussions.
Flexicom has long been tipped for a flotation, but the recent Eircom investment made such a strategy in the short term increasingly unlikely. One observer said that given the consolidation taking place in the software payments industry, and the distinct absence of any major Flexicom deals or alliances recently, it is now most likely to become "lunch for a larger player".
Following the Eircom investment last November, Flexicom's founder-shareholders, Mr Shiel and Dr John Clarke, received £2.6 million. Prior to the Eircom investment, Mr Shiel held 56 per cent of the company and Dr Clarke 10 per cent. Institutions who subscribed to a £3.5 million placing in 1998 and include AIB, Mercury Asset Management and Standard Life, between them held just under 19 per cent.
