Why Integrity is the name of the game
David Murphy talks to newly appointed CEO at Integrity, Paul Nagle PAUL Nagle is a man in a hurry.The 40-year-old has just been appointed chief executive of fast growing Dublin-based company Integrity Holdings. It has gulped down six takeovers before it reached its first birthday.
Last August, Integrity quietly saw its shares up go up in lights in a private placing raising $5m on the Nasdaq stock market in the US.
Unlike most companies which join the Nasdaq in a blaze of publicity and razzmatazz, Integrity has been keen to keep a low profile, while it has been building itself as holdings company buying up software firms.
It is also different to most start-up companies because it has no borrowings. It recently announced its first set of results showing profits before tax of $1.2m for the three months ending March 1998, almost double the profits of the earlier quarter.
Its strategy has been to buy up companies which can clearly benefit from becoming part of the new group.
Mr Nagle says: ``What we found is that a lot of software companies tend not to fund their business properly, in terms of being able to cost for support services, research and development. They depend on sales cycles.''
``There are an awful lot of underperforming software companies. We are trying to look for very mature businesses. What we find is that after a certain period of time, the actual potential of the business has suffered because of a closeness of the principals to their situation. They may not see the bigger picture.''
And this is where Integrity steps into the picture and tries to buy them.
Paul Nagle was managing director of a similar business for the past five years in South Africa called Multisoft.
That company was later taken over by information technology company Softline which heads up an association of US companies.
He was also managing director of Brilliant Business Systems part of a large technology group listed on the Johannesburg stock exchange.
Before working in South Africa, he says, he lived in the UK where he built up extensive contacts in the investment community, which will be a useful asset for his new position.
The rest of Integrity's board is made up of Paul Carroll (38), an accountant who sold his Dublin-based practice, Paul Carroll & Co, last July, to take up the position of Integrity's chief financial officer.
The company's chairman is Ken Butler (59), who has 35 years experience with UK-company Powell Duffryn, and the corporate development officer is Michael Foley (59) who worked with the IDA and former state consultancy organisation IDI.
After six months planning, the Integrity team made their first move in July when it bought the Wyse Group, a UK based leasing company which operated in the software industry.
The following month it took over Saracen Computer Services, a company which supplies software to the cleaning management industry.
In October it bought Information Support Limited which supplies hardware and networking solutions to client companies.
Having then spent £11m on acquisitions, it made its biggest takeover and bought Dublin-based Premier Computer Group for £4m.
Integrity is now based in Premier's building, opposite the Shelbourne greyhound race track in Ringsend.
Premier provides software to credit unions, print and packaging and construction industries.
Recently Integrity acquired the assets of Axon Holdings in Scotland which has now been renamed as PremierVet. It supplies vets with software packages so they can easily see when an animal was last treated.
Mr Nagle says that the key to all the takeovers is that they provide so-called ``mission critical'' software which is vital to the running of a particular business.
The companies it has bought are firms involved in activities which can be easily introduced into other markets; for example, Integrity is planning to import its veterinary software product into Ireland.
Mr Nagle argues there are also advantages for the small companies which join the larger group with a critical mass of customers which allows each division develop a broader client base.
Keen watchers of the Irish technology companies are by now well aware of the unmerciful nature of the Nasdaq market in the US, where any wobble in a company's financial performance can result in the share price taking a hammering.
Mr Nagle agrees that the Nasdaq is an ``unforgiving market,'' but he argues that Integrity has insulated itself from this risk, because it has created a stable stream of income, which allows it guarantee a certain level of revenue.
By charging a licence and support fee to clients, it gives Integrity a ``recurring income'' which accounts for almost half of its income.
This makes it less vulnerable to the profit fluctuations which have hit companies like Iona, which suffered badly when it did not meet sales targets.
At the moment Integrity has about 300 shareholders. The shares were offered to business contacts of the team which initially Integrity set up.
By adopting a philosophy of zero borrowings, it paid for most of its acquisitions using shares. Its current policy is that it will look at the possibility of publicly offering shares on the Nasdaq to fund future acquisitions if the need arises.
Mr Nagle says: ``We are now looking for a substantial acquistion in Europe, the UK or the US.''
Integrity has also started its own company called Hokinewmedia with a staff of 12, which specialises in setting up web sites for firms.
``We have 10,000 corporate customers throughout the whole group and this is a huge corporate relationship. And if you have access to that and market your services in there, with networking or website design with Hoki, it allows you to synergise your business.''
Integrity now has a total of 250 employees, and that figure is climbing, says Mr Nagle.
Paul Nagle has a home near Faro in Portugal, in the Quinto Da Lago development which is owned by Esat Telecom boss Denis O'Brien.
``The one thing about South Africa, aside from the crime, is the climate; you get totally spoilt with the weather. We looked at Paris and the South of France, and chose Portugal.''
Aside from trying to spend weekends and holidays in Portugal, he still has a house in Johannesburg in South Africa as well as a home in Howth.