No buyer at 30p: what Checkit’s failed sale process tells boards

On 28 September Checkit ended the formal sale process it had launched on 26 March. The AIM-listed company, whose software links the sensors that monitor critical conditions to the workflows and audit records around them, came away with no deal and a detailed public record of what buyers had offered.

According to the announcement, three credible potential acquirers made non-binding offers after initial due diligence: 22p, 25p and a range of 31–33p a share. On 8 September the board had said it would not consider proposals below 30p. After discussions with the first two bidders, the board concluded it could not agree a valuation at a level it could recommend to shareholders. The third bidder pulled out, having concluded that Checkit did not fit closely enough with its existing business. Other verbal indications came in at 20–25p, which the board did not pursue, and one at 40p, which that party did not progress.

The same day Checkit published results for the six months to 31 July. Adjusted earnings before interest, tax, depreciation and amortization (EBITDA) from continuing operations was a £0.3m profit, against a £0.9m loss a year earlier. Revenue rose 3% to £6.3m, recurring revenue made up 97% of it and annual recurring revenue (ARR) rose 5% at constant currency to £12.8m. On a statutory basis continuing operations still lost £1.2m, and cash at the end of July was £2.9m.

A sale process that ends without a sale reads like a failure. The more useful reading is that Checkit’s board now holds a priced, written verdict from outside buyers on what the business is worth and why. For the leaders of UK technology businesses, the case is that an exit process is worth running as a diagnostic, with the board deciding in advance what it will do with the answer.

What the bids actually said

The spread of offers carries two separate messages. On price, the two bids that were pursued sat about 27% and 17% below the board’s 30p floor. On fit, the only formal bidder above the floor left because it concluded Checkit did not sit closely enough with its existing business. A board that hears “no” without that distinction learns little. A board that can separate the two knows which problem belongs to the numbers and which belongs to the buyer universe it approached.

Checkit’s own reading is generous. The board said the process had “reinforced the Board’s view that Checkit represents a strategically relevant platform within an attractive and consolidating market”. Kit Kyte, chief executive officer, called it “valuable external validation” of the technology and the customer proposition. Validation that arrives below the floor is a qualified kind. Buyers, on this evidence, liked the platform and priced the growth.

The growth is the point at issue. Revenue grew 3% in the half. The profit swing came mainly from cost: operating expenses fell from £5.0m to £4.1m, according to the income statement, while gross profit rose from £4.1m to £4.4m.

Turning due diligence into targets

What sets Checkit’s announcement apart is that it turns the process into a plan with numbers attached. In his statement Kyte said the due diligence “yielded valuable intelligence” and confirmed where management must concentrate: commercial execution, growth in the highest-quality segments, finishing the move to one platform and further gains in profitability. “Those conclusions do not require a change of direction. They require tighter execution against a narrower set of priorities,” he said.

The board has set a two-year framework with two retention targets: net revenue retention of 105–110%, against 102% now, and gross revenue retention above 95%, against 94%. A year earlier the figures were 101% and 90%. In the half, new bookings rose to £0.7m and churn fell to £0.5m.

Putting numbers on retention rather than on headline growth is the right call. It ties the plan to the recurring revenue that, by Kyte’s account, acquirers recognized, and publishing the targets lets shareholders hold the board to them. The narrowing is specific too. Medical customers produced 71% of revenue in the half, and Checkit said smaller, fragmented retail opportunities “will receive less attention in future”. It retired a legacy product supplied to a single customer, giving up £1.6m of ARR to remove about £0.7m of annualized cost and a separate technology estate. Parallel customer testing on the unified platform is expected to begin from February 2027, followed by a phased migration over several quarters.

Price the diagnostic before running it

The exercise was not free. The process ran for six months, with management presenting to strategic and financial acquirers. The interim accounts show £0.4m of transaction costs in the half, more than the period’s adjusted EBITDA, though they do not itemize what the costs relate to. The company also concedes that delivery against the new framework “will not necessarily be linear” while it pays to finish the platform and strengthen its go-to-market work.

For a business with £2.9m in the bank, those are real costs. They are also the argument for running a process deliberately rather than drifting into one. Boards weighing a sale should settle three things before the first management presentation. First, what floor they will defend, and whether they will say it in public, as Checkit did three weeks before the process ended. Second, which findings they will act on if no bid clears it. Third, which two or three metrics will show investors that the lessons were taken, so that “no sale” becomes a standalone plan rather than an awkward silence.

Checkit has done the last part. It named the bids, named the gaps and put retention targets against them. The next two years will show whether the buyers who offered 22p and 25p were reading the business correctly. Either way, the board now knows what it has to prove, and so does everyone who owns the shares.