Management's plan to take Alphyra private has created a very public mess and left a bad taste in the mouth for many investors, writes Jane O'Sullivan, Markets Correspondent.

It is now more than three months since management at Alphyra first unveiled plans to take the company private. But given the twists and turns in the Alphyra tale in recent weeks, shareholders could be forgiven for being less certain than ever about its future.

After a disappointing stock market performance in recent years, Alphyra's management became the latest to opt for the public-to-private route when they signalled their intention to launch a management buyout (MBO) in early November. But since then, the course of the offer has been far from smooth.

The entry of rival bidder First Data Corporation (FDC) into the fray late last year, its abrupt withdrawal amid concerns about management hostility and the recent surprise decision of the MBO team to raise its original offer by 10 per cent have provided plenty of drama but have also created much unhappiness among shareholders.

Indeed, there has been enough concern out there that at least one complaint about the handling of the bid process had been lodged with the Irish Takeover Panel which is considering the issue.

Investor concern centres in particular on the MBO team's negative response to the emergence of Denver-based First Data as a rival bidder.

In a surprising and unusual move, the MBO team - which includes chief executive Mr John Nagle, finance director Mr John Williamson and chairman Mr Jack McDonnell, all directors of the company - said they would regard any bid by First Data as "hostile and most unwelcome".

Alphyra's two non-executive directors, Mr Nick Koumarianos and Mr Grant Wilkinson, were quick to counter the statement, saying any higher offer for the group would be welcomed.

But given First Data's subsequent decision not to proceed with an indicative offer of €2.80 per share, well above the original MBO price of €2.45, it was inevitable that management would stand accused of frightening off the US company, which has never launched a hostile offer.

Institutional investors have certainly found the whole situation disquieting.

"Management's handling of the bid process has been pretty questionable and their reaction to a competitive bid was inappropriate," said one disgruntled fund manager.

"I'm a shareholder and it's my company as much as theirs. I could say I regard their bid as hostile because it's so opportunistic."

But it remains far from clear what lay behind First Data's sudden withdrawal from the bidding process and whether management's attitude played any part.

First Data's decision not to proceed with its indicative offer, signalled in a one-line letter without explanation, is understood to have surprised and disappointed Alphyra's independent directors who were in the process of satisfying First Data's preconditions.

It is also believed that the US group did not contact certain large institutional investors, the usual route for frustrated bidders keen to exert pressure on a reluctant target.

A spokesman for FDC-owned Western Union in Paris said its withdrawal was due to "nothing more complex" than that it felt the conditions set forth in its indicative offer were not going to be met so it withdrew its offer.

He also confirmed that the company had not made any complaints about the process.

Not surprisingly, sources close to the MBO team are quick to claim that First Data had no real interest in Alphyra but only wanted to get its hands on valuable information about its business.

But other sources close to developments at Alphyra believe that First Data, which had indicated that the support of the management team was not a precondition for an offer, was keen but opted out at the last minute.

"I think that the people on the ground doing the deal put it in the 'too difficult tray'.

"It was a relatively small transaction, a long way from home with issues around it in terms of noise. There was nobody on that team prepared to say they were ready to do the deal, roll up their sleeves and get stuck in."

Whatever the reality behind First Data's departure, shareholders are now left with just one offer on the table.

Admittedly, Rendina, the MBO vehicle backed by Benchmark Capital, has upped its offer from the original €2.45 to €2.70 following pressure from investors and Alphyra's independent directors. But is it a fair price?

The New York-based Kaufmann Fund, which holds 7 per cent of Alphyra's shares and is understood to have lodged a complaint with the Takeover Panel, has already made it clear it will reject the offer on the grounds that it represents poor value for shareholders.

But any calculation of what Alphyra is worth is heavily dependent on the view taken of the company's prospects and its chances of cracking the French and German markets in particular.

"The business is at such a stage of development that I could give you a rationale to justify a share price of €2 or €5," one fund manager said.

Davy Stockbrokers has put a sum-of-the-parts valuation of €3.00 on the company. But analyst Mr Barry Dixon believes the €2.70 per share offer is "a fair price, even reflecting the growth potential" because of the execution risk involved in developing the business.

Whether anyone else is prepared to pay more for the business than the MBO team remains to be seen.

Another US company, Kansas-based Euronet, has been sniffing around Alphyra for some time but has made no progress with an offer of any kind.

"I would be very sceptical as to whether they are going to come forward," said one source close to the company.

Atlanta-based Global Payments has also confirmed that it had considered making a bid for Alphyra but did not proceed because it was not interested in doing anything that would be perceived as hostile.

But at the end of the day, perhaps the real source of investor discontent lies not in the rights and wrongs of management behaviour in the past few weeks but in how things came to this.

Having bought into what many still believe to be a strong growth story, they are now being asked to sell out at the worst stage of the economic cycle to a management team that, in the words of one analyst, "have a history of over-promising and under-delivering".

Coming in the wake of similar developments at Riverdeep and Conduit, developments at Alphyra have simply left a bad taste for many investors.

"Many of these technology companies came to the market, promised the world, seriously disappointed and then management comes and takes the company away again," said one disgruntled shareholder, who is learning the painful lesson that sometimes the culture of the shareholder and the entrepreneur just don't mix.