Misys PLC

1970–2001

Sometimes called the United Kingdom's Microsoft, Misys PLC is at least that country's leading independent information technology (IT) company. Unlike its behemoth U.S. counterpart, however, Misys, which posted revenues of nearly £850 million in 2001, concentrates on providing applications software solutions for the international banking, insurance, IFA (independent financial advisors), and healthcare industries. Originally focused on the insurance sector, Misys has achieved rapid growth through an aggressive acquisition program, with purchases including banking and security software group Kapiti--renamed Misys International Banking Systems in 2001; the acquisition of ACT Group PLC (now split into Misys Asset Management Systems and Misys Securities Trading Systems) in 1995; the $923 million purchase of U.S.-based medical software provider Medic Computer Systems, made in 1997; and the $400 million acquisition of Sunquest Information Systems Inc. in 2001. Misys, which trades on the London stock exchange--and made history in 1998 when it became the first IT stock to trade in the FTSE 100--is led by Chairman and cofounder Kevin Lomax.

Software Success in the 1980s

Misys PLC was founded as Misys Microcomputer Systems by Kevin Lomax, one-time rising star within the Hanson Plc conglomerate, insurance broker Peter Morgan, whom Lomax met in a hospital maternity ward where both were awaiting the births of their children, and investors John and Jeremy Beasley. The company's initial purpose was to develop microcomputer systems and software to service the insurance industry. Lomax, however, was to prove the driving force behind Misys's later growth.

Lomax had entered the Hanson conglomerate in 1970 after graduating from the University of Manchester. By 1973, Lomax had gained a position as managing director of Hanson's British Furnaces subsidiary. At the age of 25, Lomax had become the youngest managing director in Hanson's history. Lomax then went on to take top positions at Wellman Incandescent Ltd. In the meantime, Lomax had become one of the founding investors in Misys. His investment gave him the title of non-executive chairman, while Lomax continued to pursue his career, becoming head of the electronics components division of Standard Telephone Company.

Misys struggled along in its first few years. Early losses forced the company to restrict its focus to developing applications and hardware systems targeting the insurance sector. The company remained small and continued building up debt.

In 1996, the company made two strategic acquisitions in that market, paying $94 million for The Frustum Group Inc.

1985–1992

Disagreements over strategy led to Lomax's resignation from his post at Standard Telephone Company. Lomax began to seek a new direction for his career. As he related to the Daily Telegraph: "My wife told me, rather unhelpfully, that I was clearly unemployable and if I thought I was so great I should get on and build my own business." Lomax's wife's advice proved more helpful than Lomax had thought. Looking about for prospects, Lomax settled on his investment in Misys, telling the Daily Telegraph: "I looked at little Misys, which was sitting there with 30 people and debts of £300,000 and thought, well, maybe I should have a go."

Lomax convinced Misys's other investors to give him six months to turn the company around, and in 1985, Lomax took on an active role as Misys chairman. Within a year Lomax had helped the company pay off its debts and even to make a profit of £0.5 million. The company continued to build organically over the next couple of years, increasing its customer base. In 1987, the company went public, with a placement on the U.K. Unlisted Securities Market.

The company remained tiny--its listing placed its worth at just £8.5 million. Yet the public offering marked a new phase in the company's growth strategy. The company now began to diversify its operations, moving away from its roots targeting the insurance broker sector. Over the next several years, the company began making a number of acquisitions, while also investing strongly in developing its own software packages. An important element of the company's new growth strategy came in 1989, when the company's stock joined the London main board. Among the company's new markets was the information services sector, particularly applications targeting the leisure and construction industries.

Diversified Software Leader in the 21st Century

In 1992, Misys moved into the financial services sector for the first time, when it implemented new software and support services for the United Kingdom's IFA market. The company then acquired a 20 percent share in Countrywide, a cooperative organization handling the administration needs of a group of IFAs. Misys soon took over full control of Countrywide. Its new subsidiary was to serve as the core around which the company developed its IFA sector business throughout the decade.

1994–1997

Financial services remained the focus of Misys's growth ambitions in the early 1990s. In 1994, the company took a major step forward, when it acquired Kapiti, a developer of software for international banking groups. Kapiti gave Misys an entirely new scope, and, with 15 offices operating worldwide, enabled Misys to move beyond the U.K. market for the first time. Adding Kapiti helped boost the company's revenues past £93 million in 1994, while the company's profits were soaring, to nearly £19 million. With its international sales now representing 25 percent of total turnover, Misys began looking for more acquisitions, particularly an entry into the high-powered U.S. market.

The Kapiti acquisition proved to be only the first of several during the decade that were to transform Misys into the United Kingdom's leading independent IT company. The company now abandoned its remaining hardware systems and support operations to focus entirely on the development of software for the financial services sector. This market was undergoing a huge growth spurt in the 1990s as bank and other financial institutions came to rely on computer technology.

In 1995, Misys acquired the ACT Group, which specialized in banking software. This purchase helped the company boost its position not only in the United Kingdom, but worldwide. With its new acquisitions, Misys had become the outright leader in the worldwide financial services software sector, numbering some 45 of the world's top 50 banks as its clients.

The following year, Misys began to make its mark in the United States. In 1996, the company made two strategic acquisitions in that market, paying $94 million for The Frustum Group Inc. and $50 million for Summit Systems Inc. These acquisitions were followed by a still larger purchase that also saw the company expand into a new market. In November 1997, Misys paid more than $920 million to acquire Medic Computer Systems. That purchase gave Misys a top-five spot among healthcare IT companies. With clients numbering more than 11,000 practices and 65,000 doctors, the deal made Misys a major supplier of practice management software and medical records systems for the nation's healthcare practitioners. By then, Misys's revenues had swelled past £300 million.

The following year, Misys found itself being dubbed the U.K. Microsoft as its share price soared. Riding high on a surge in demand at the end of the decade--as customers rushed to ready themselves for the potentially catastrophic Y2K bug--Misys saw its market value top £2.8 billion. Misys's surge in value earned the company a place on the FTSE 100, becoming the first IT company to crack the prestigious U.K. index. The company's position was to prove on-again, off-again, as a drop in its share price saw it fall out of the FTSE 100 at the end of that same year.

1999–2001

At the beginning of 1999, Misys acquired CATS, based in California, giving it a world-leading position as a maker of risk management systems for banks. This acquisition coincided with Misys's move to focus its operations around its two strongest divisions, banking and healthcare. As part of its reorientation, the company sold off its information services division, which had been generating more than £47 million in sales and operating profits of £5 million, to the venture capital division of Dresdner Kleinwort Benson for £35 million. Following the disposal, the company's Banking and Securities division alone was worth 60 percent of the company's total turnover; the Healthcare division represented 31 percent of sales.

Misys went online in 1999, opening its business-to-business portals, m-link and i2i-link, geared toward the financial advisor and insurance sectors. The company also made an attempt to turn its financial services expertise toward the consumer public, when it launched two Internet-based financial services portals. Those ventures, screentrade.com and theformula.com, which started up in 2000, gave site visitors access to comparison tools and other services for car insurance and mortgage rates and other financial products. Neither site was successful, however, and in mid-2001 the company made the decision to pull the plug on both. Elsewhere on the Internet, Misys joined in an alliance with Healtheon Corp., which then merged into Web MD, forming the leading U.S. healthcare portal. As part of the alliance, Misys received a stake in the company worth an estimated $5.5 billion, in exchange for rolling out its e-commerce services through Misys's medical practice software.

Misys took 2000 off to digest its acquisitions and to recover from an industrywide slowdown relating to the run-up to the Y2K bug. Although sales grew slightly, to £698 million in 2000 from £628 million the year before, the company saw a drop in profitability.

The company was back on the growth trail by the following year. In June 2001, the company offered £75 million to acquire rival IFA services provider DBS Management. That deal was followed by an even larger purchase, when the company announced an agreement to pay $404 million to acquire Sunquest Information Systems. The purchase of that U.S.-based business helped Misys achieve its aim of broadening its healthcare business. The move also presented the future potential of linking Medic's physician-based operations to Sunquest's hospital-focused activity, providing an integrated communication platform between the two markets. The two deals helped the company's revenues grow to nearly £850 million by the end of its 2001 year.

A slump in the worldwide financial sector at midyear forced the company to post a profits warning. The September 11 attacks dashed the company's hopes for a quick turnaround. In an effort to revive the company's core banking division, Misys rebranded its Midas-Kapiti International division as Misys International Banking Systems at the beginning of October 2001. The company then restructured its banking and securities division, adding two new entities, one for the asset management market, the other targeting the securities trading sector. Continued uncertainty over the worldwide financial market dogged the company through the end of the year. Yet Lomax insisted on looking beyond the company's share price and focused instead on Misys's strong growth prospects for the years ahead.