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Rosslyn Data – why are you hiding the related-party nature of this dog of a deal?

By Cynical Bear | Tuesday 2 May 2017


Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.


Tom Winnifrith has already covered the hidden bailout placing aspects of the Integritie deal announced by Rosslyn Data (RDT) last week (HERE) but I thought it worth elaborating on the deal (which looks like a real dog) and asking the simple question: why haven’t you told your shareholders about the related-party aspects?

The details of the acquisition are worth looking at in a bit more detail as they indicate that Integritie was in a real mess and in desperate need of this deal. The RNS sets out the results for Integritie for 2015, losing £2.4 million on revenue of £3 million, down from a profit before tax of £900,000 from revenue of £5.4 million in 2014.

There are no results for 2016 (which would have been helpful); however, we do know that although the headline states that the acquisition is for £2.588 million, only £55,000 is being paid to the shareholders, the rest is the repayment and assumption of debt, so clearly it was struggling under the weight of debt on the balance sheet and I note also that it has entered into two different invoice finance facilities to try to ease its working capital worries.

In situations like this, one wonders whether there might be better deals available by letting a business like this go to the wall and picking it up cheaply from the administrators; however, who is to know whether that would have actually been possible in this case.

Nevertheless, although the shareholders of Integritie didn’t get too much out of this, I still thought the following line from the RNS was interesting:

“Under the terms of the Acquisition Agreement Rosslyn has conditionally agreed to acquire the entire issued share capital of Integritie from its shareholders, Electronic Archive Solutions Holdings Limited, Peter James Lewis and Bernard Paul Quinn”

Bernard Paul Quinn, or Barney Quinn as he’s known to his friends, is the Chairman of Integritie as well as being a shareholder, having joined the Board in mid-2016 but……he’s also a director of Rosslyn Data!

I’ve read the RNS a few times and also read the shareholder Circular relating to the deal but I cannot find any explicit reference to the fact that this deal involved one of its directors. Normally one would see some mention of it at least and maybe even a statement that he wasn’t involved in the board discussions on the topic but I couldn’t find anything. For all anyone knows, he could have been an Integritie loan note holder too and been a further direct beneficiary of the deal.

Why the non-disclosure? For all I know this might be a very sensible deal. I can clearly see merits in two sub-scale loss-making tech businesses joining forces to cut costs and improve sales prospects although whether those benefits are sufficient to establish a profitable business is another matter.  A wise man once told me in my M&A days that “You can tie two bricks together but they still won’t float.”

Quite. I suspect that might prove to be the case here too but, if I had any doubts as to whether to invest in this turnaround play, the insufficient disclosure over Barney’s role here has quashed them.

If you were thinking of getting involved in the open offer, you may want to reconsider!


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