November 25, 2010 1:20 am

‘Additional opportunity’ at Autonomy

Shares in Autonomy dropped on Wednesday after the software company indicated that it was considering “an additional opportunity” relating to its highly anticipated acquisition.

Mike Lynch, chief executive, has long said that the Cambridge-based company would make an acquisition “this autumn” after raising £500m in a convertible bond issue in February. Autonomy has a cash pile of about $1bn (£634m) to spend on an acquisition.

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The software company has remained quiet over the identity of its target.

Analysts have speculated that it could include groups such as Open Text of Canada.

On Wednesday, Autonomy issued a statement saying that while it had been working on an acquisition over the past few months “recent developments” within these talks had “given rise to an additional opportunity that warrants further examination”.

Autonomy would not be drawn on what the recent developments were but said that the acquisition would now take longer than expected.

The news initially pushed the shares down as much as 9 per cent, but they recovered to close 80p, or 6 per cent, lower at £12.71.

Deutsche Bank said Autonomy’s statement could indicate that it had been looking to buy part of a business but had since widened the scope of the deal, or that it had pinpointed an additional takeover target.

The bank said a further possibility was that Autonomy was buying a subsidiary in a business and was now discussing whether it could be acquired by the parent.

Analysts said it was unfortunate that Autonomy, which only last month said it was still expecting to announce its acquisition in the autumn, had boxed itself into such a set timetable.

There have been relatively few mergers and acquisitions in the UK technology sector this year. However, bankers and private equity groups said they expected to see more acquisitions within the software and services sector in the next six months.

Last week Misys, the financial software provider, said it would acquire rival Sophis for £235m with funds from the disposal of its Allscripts healthcare arm.

Autonomy, which provides software that allows companies to search and organise unstructured information, such as e-mails, last month reported steady third-quarter results. However, the company said some customers were “oscillating” from week to week on their investment decisions, making it difficult to predict accurately which of them would buy.

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