Provided that the two entities maintain a close working relationship then the ability to cross sell products will achieve the same outcomes that were desired by RKN from acquiring this/ these businesses in the first place.
It will also ensure that cashflow can be directed to growing and developing its core accountancy software business vs. being stretched over multiple business divisions and not really providing the funding that any of the business units require.
It will also provide an immediate cashflow if, as part of an AIM listing, RKN vend some shares in 'newco' over and above those distributed to existing shareholders.
Conversely, it could be interpreted that this business is not performing to expectations, the market is possibly more competitive than anticipated or requires more capital to grow than anticipated.
It could also mean that RKN has given up on trying to grow the North American market for their accounting software and will focus on their existing markets which will obviously limit scalability.
Whether this turns out to be a positive for RKN and shareholders remains to be seen and will depend upon the stand alone viability of both entities and whether 'newco' is given enough support to grow or is cast off as an orphan.
Whilst the initial reaction was negative this morning it seems the market is now quite sanguine about it.
Cheers
John
RKN Price at posting:
$1.79 Sentiment: None Disclosure: Held
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