Agilysys looks for a buyer

Agilysys Inc. (NASDAQ: AGYS), which provides information technology services, is a typical small-cap operator with a market valuation of only $308 million or so. Given its size, it's tough to get traction in terms of analyst coverage and stock price appreciation. Instead, Agilysys has attracted a variety of hungry hedge funds – like Ramius Capital, which owns 7.6% of the common stock.

So, Monday the company announced that it has retained JP Morgan (NYSE: JPM) to explore strategic alternatives. Basically, the company is looking for a buyer.

Agilysys's services are focused primarily on the retail and hospitality sectors. To boost things, the company has made a variety of acquisitions over the past couple years, such as for Innovative Systems Design, InfoGenesis, Stack Computer and Visual One Systems Corporation. Unfortunately, the results have been lackluster. Over the past year, the shares have gone from $23 to a low of $9.21.

In the latest quarter, Agilysys posted a loss of $807,000 or $0.03 per share. Yet, revenues surged 75% to $206.4 million (no doubt, there was lots of help from acquisitions). Actually, it looks like customers are starting to pull back on deals.

In other words, there may be trouble in getting a premium valuation for Agilysys.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates MergerBook.com.