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Secondary Buyout For Instem

Independent private equity firm Alchemy has sold the computer systems business of Instem that it took private after buying the entire share capital of the company. Instem was listed on the London Stock Exchange. Alchemy has become a notable player in the public to private equity arena already achieving a number of exits see EVCJ June p19.

The sale of Instem Computer Systems to Bridgepoint Capital, formerly NatWest Private Equity, was in the form of a secondary buyout valuing the company at GBP30.5 million, including debt provided by Bank of Scotland, which also supported Alchemy’s original buyout of Instem. Instem computer systems will retain the Instem Limited name. Advisers to Bridgepoint Capital were Cameron McKenna, Ernst & Young, and, for commercial due diligence, ADL. Management, which is to remain with the business, was advised by Wragge & Co.

Instem Computer Systems provides computer-based operational management systems and services to utility companies. It main activity is the assembly and systems integration of the operational control systems for major power stations, electricity sub-stations and control units for water utilities. In 1997 the bid was announced in September and formalised in November the terms of Alchemy’s bid for Instem plc were GBP2.10 in cash per share, or a total value of GBP9.789 million. (The value included 1,685,967 Instem shares, or a 36.2 per cent stake to be acquired from Harnischfeger Industries.) At the time of Alchemy’s buyout it noted that the transaction had cost around GBP11 million with around GBP5 million in equity funding of this GBP4 million was from Alchemy funds and GBP1 million from management and the remainder was made up with debt finance.

Wise Speke and, on legal matters, Slater Heelis advised Instem in the 1997 buyout and Alchemy was advised by Rickett Mitchell & Partners and, on legal matters, by Kent Jones & Done.

Martin Bolland at Alchemy notes that profits, which were up by nearly 300 per cent across of all Instem’s three divisions, were ahead of Alchemy’s original business plan for the company. In the financial year to December 1996, Instem reported revenues of GBP23 million and trading profits of GBP1.3 million.

Aside from Instem Computer Systems there is a division called Instem Electronics and another called Instem Apoloco. Instem Electronics division manufactures complex high tech capital equipment such as mass spectrometers and components for flight simulators. Instem Apoloco is a specialised software house focused on information systems and service for pre-clinical trial laboratories. Bolland notes: “The other two divisions are still being developed and we don’t anticipate an exit in the very near future.”