Summary

  • Accel-KKR’s acquisition vehicle has offered 235 pence in cash for each Eleco share, implying £207.6 million of fully diluted equity value and £192.4 million of enterprise value.
  • The 74.7% premium to the undisturbed closing price is the shareholder headline; the operating headline is a valuation of 20.2 times 2025 EBITDA but 31.9 times Cash EBITDA after capitalised development expenditure is treated as a cash cost.
  • Eleco brings £34.3 million of 2025 annualised recurring revenue, 81% recurring revenue and a debt-free balance sheet. Its June 2026 ARR run rate had reached £35.5 million.
  • The original 45.2% “support” combined irrevocable undertakings with non-binding letters of intent. It was not approval, and subsequent changes took the published figure first to 49.2% and then to 48.37%.

The most revealing number in Accel-KKR’s recommended cash acquisition of Eleco is not 235 pence. Nor is it the 74.7% premium to the share price before the announcement. It is the gap between two earnings multiples attached to the same £192.4 million enterprise value: 20.2 times EBITDA and 31.9 times Cash EBITDA.

That gap is where a recurring-revenue software story meets the continuing cost of building the software. Eleco has spent two decades moving from physical building products into tools for project planning, estimating, maintenance, facilities and portfolio management. Its products sit inside the built environment rather than on a consumer’s screen: Asta Powerproject helps schedule construction; Bidcon supports estimating and cost control; ShireSystem and Pemac cover maintenance; PM3 and Kivue address project portfolios. Accel-KKR is buying the workflow position, customer relationships and recurring revenue that those products have accumulated.

Three valuations, three different questions

Avocet Bidco, the Accel-KKR vehicle, is offering 235 pence in cash per share. The announcement says this values the fully diluted share capital at approximately £207.6 million. It then deducts the effect of Eleco’s balance sheet to arrive at £192.4 million of enterprise value. Equity value answers what all diluted shares cost. Enterprise value is the cleaner figure for comparing the operating business with its earnings.

The share price comparison answers a third question. At 235 pence, the bid stood 74.7% above Eleco’s 134.5 pence close on 9 September, the last business day before the offer announcement. It was also 86.0% above the three-month volume-weighted average, 89.9% above the six-month average and 77.7% above the twelve-month average. Those figures show how much immediate liquidity was offered to holders of a relatively illiquid AIM share. They do not, by themselves, show whether the business is cheap or expensive.

For that, the denominators matter. The offer announcement compares enterprise value with Eleco’s EBITDA for the year ended December 2025 and gives 20.2 times. Simple division implies an EBITDA base of about £9.52 million. The same enterprise value is 31.9 times “Cash EBITDA”, implying about £6.03 million. These are calculations from the published values, not company forecasts.

The announcement defines Cash EBITDA as EBITDA less capitalisation of intangible development expenditure. In other words, software-development spending that accounting rules place on the balance sheet is charged against the cash-oriented denominator. The resulting multiple is more than eleven turns higher. That is not a clerical curiosity. It is the price of asking how much operating earnings remain after treating continued product development as a current economic cost.

The distinction also prevents an easy category error. Eleco’s 2025 results reported adjusted EBITDA of £10.229 million. Statutory EBITDA was £6.859 million after a £2.343 million non-cash impairment associated with the former Veeuze visualisation business; EBITDA before that impairment was about £9.2 million. Each figure has a different purpose. None should be silently substituted for the offer announcement’s stated EBITDA or Cash EBITDA denominator.

Recurrence creates visibility, not automatic cash

Eleco’s attraction is visible in the revenue mix. For 2025, revenue rose 20% to £38.816 million. Annualised recurring revenue reached £34.3 million, total recurring revenue rose to £31.313 million and recurring revenue represented 81% of the total. Adjusted profit before tax was £7.3 million. The group ended the year with £16.3 million of cash, no debt and £8.2 million of free cash flow.

The first half of 2026 extended that pattern. At 30 June, ARR was approximately £35.5 million, up 16% as reported and about 23% organically. Recurring revenue was £16.9 million, 85% of total revenue. Reported revenue rose 8% to £19.862 million and organic revenue rose 15%. Adjusted EBITDA increased 30% to £5.614 million; free cash flow was £3.5 million; cash was £15.4 million; and the company remained debt free. Net revenue retention above 113% indicates that the retained customer cohort was expanding, not merely renewing.

These numbers explain the premium without making it self-justifying. On simple calculations, the stated enterprise value is about 5.61 times 2025 ARR, 5.42 times the June 2026 ARR run rate and 4.96 times 2025 revenue. Those ratios are useful context, not comparable-company conclusions. ARR can include businesses, contract terms and gross margins that differ materially. Renewal does not eliminate implementation costs, sales expense, product investment or acquisition integration.

Accel-KKR’s thesis is therefore recognisable: take a specialist software portfolio with strong recurrence, provide capital for product development, SaaS migration, AI and acquisitions, then expand internationally. The firm says it has more than $23 billion in cumulative capital commitments and experience in mid-market software. It also says that after completion it expects a roughly six-month review covering areas including go-to-market execution, cross-selling, pricing and packaging, the product platform and AI. Those are intentions and review areas, not a quantified benefits plan.

Forty-five per cent was a support description, not a vote

The offer announcement’s other easily misread number was 45.2%. Bidco said holders representing 38,161,917 shares supported the acquisition. But that total combined instruments with different legal force.

Eleco directors had given irrevocable undertakings over 408,725 shares, about 0.5% of the issued capital. Allen & Co and members of the Ketteley family had given irrevocable undertakings over 19,788,330 shares, about 23.4%. Four institutions—Charles Stanley, J O Hambro, Janus and Jupiter—had provided non-binding letters of intent over 17,964,862 shares, about 21.3%. The arithmetic reached 45.2%; the commitment did not have one uniform quality.

Events within the following week made the boundary tangible. A non-binding letter from Tikvah Management covering 3,380,614 shares lifted aggregate cited support to 49.2% on 17 September. On 18 September, Eleco disclosed that J O Hambro had sold 725,000 shares, reducing its letter to 1.4 million shares and bringing aggregate cited support down to 48.37%. Nothing improper is implied by that movement. It is simply what “non-binding” means in practice.

Nor would even a stable 49% figure complete the scheme. At the Court Meeting, the scheme needs a majority in number of voting Scheme Shareholders who represent at least 75% in value of the shares voted. A separate special resolution needs at least 75% of votes cast at the General Meeting. Court sanction, delivery of the order and the other conditions must follow. Completion is expected during or before the first quarter of 2027, with a long-stop date of 10 March 2027.

The deal is to be equity-funded from Accel-KKR funds, and Rothschild has confirmed sufficient resources for the cash consideration. The board has recommended it and cited the certainty of cash against the risks of executing Eleco’s standalone investment plan. That recommendation matters. It is still not the same thing as the shareholder decisions and court process that make the acquisition effective.

The clean reading is therefore two-sided. The bid offers shareholders a large premium and removes the liquidity and execution risk of waiting for a small listed software group to compound. In exchange, they surrender the upside if Accel-KKR can turn £35.5 million of ARR into much larger and more cash-generative international revenue. The 20.2 times EBITDA figure prices the operating story. The 31.9 times Cash EBITDA figure prices the development work required to keep that story alive.

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