500% return in four months:

Well Lloyds TSB Development Capital just might, following this week's exit from the Cyborg deal it signed only in January.

The sale of UK-based Cyborg Systems by Lloyds TSB Development Capital only four months after it acquired the human resources services company was not on the business plan it agreed with the management team back in January. But as LDC director Julian Carr concedes, he and his colleagues were alive to the possibility “that somebody might pop out of the woodwork and be attracted to Cyborg for the same reasons we bought it.”

In the event, somebody – namely Spanish knowledge software company Meta4 – did pop out of the woodwork and agreed this week to pay a total consideration of between £15m (E25m) and £22m to secure Cyborg. The final price is subject to performance criteria, but if it turns out to be the higher price, LDC stands to achieve an amazing return of 500% on the £4.7m it invested in the original £11m management buy-out of Cyborg from its former US parent. Not bad for four months’ work.

Carr is keen to point out that LDC bequeaths one legacy to Cyborg’s new owners: Darryl Howe, the non-executive chairman and operations director at ITnet, brought in by LDC to refocus the company on its outsourcing operations.

But not that the management team is complaining. According to Carr: “They gained independence from an American parent, got some equity, and now have a load of cash to pay off their mortgages.”

Carr says the sale reflects the strength of the IT sector generally. Leaving aside the stockmarket woes of Internet stocks, which LDC avoids, he explains: “A lot of people have been focussed on Y2K and the Euro. But now people are spending their budgets on actual improvements to systems. So I think it is a very positive environment for businesses to be developing in.”