The Innovation Group (TiG) is in takeover talks with a number of big name private equity companies; with bids expected to hit at least £100m, almost five times the company's current value.
Silver Lake Partners, Carlyle Group and HG Capital are the frontrunners for TiG, which has a market cap of £22.4m. It is understood that more than 10 firms have expressed interest in a deal in the past few months.
The proposed bids range from 15p to 22p per share, according to a source close to the deal who added that the company was more likely to accept the acquisition of a significant stake rather than a full takeover. The shares closed at 3.45p last night.
HG currently heads the pack and has moved on to a second round of due diligence, with the others expected to follow. TiG, which has a global software partnership with IBM, declined to comment yesterday. HG and Carlyle also declined to comment, while Silver Lake was unavailable.
The private equity companies have been pursuing TiG for almost eight months, and Silver Lake approached the company informally in June. The management, led by chairman Geoff Squire, had resisted all overtures in the past but is now in talks with the three suitors. One source close to the situation said the credit crunch had forced the board to rethink its strategy as the share price has plunged from 32p a year ago.
Jonathan Imlah, an analyst at Altium Securities, said: "If you took a straw poll of investors, they would jump at a half-decent offer for the company."
The size of the bids will raise a few eyebrows, but the fierce competition for the asset and the business pipeline has driven offers up, the insider said. Silver Lake and Carlyle are understood to be interested in a deal for the entire company, while HG could take an equity holding.
"The management still doesn't want to sell but would now see the value of having private equity expertise. Should an approach be made to take a stake they would welcome it," the source said.
TiG provides outsourcing services to insurance companies around the world to help them reduce costs. It was set up in 1997, before listing on the London Stock Exchange three years later.
"There's a kernel of a good company but it is poorly run. The management has a lot to answer for; investors seem to have lost confidence," Mr Imlah said.