Shares in Midlands software group Misys plunged about 20 per cent yesterday after talks to buy the company collapsed - prompting chief executive Kevin Lomax to quit with immediate effect.

The banking and healthcare software company announced the process had been brought to a close late on Friday.

Mr Lomax, who set up the company 27 years ago, had held discussions with independent directors at Misys, but was unable to turn those talks into a formal offer.

And Misys chairman and acting chief executive yesterday said he had "no choice" but to terminate the takeover auction of the Evesham-based group after potential bidders refused to put any price on the table.

A founding investor in Misys in 1979, Mr Lomax was non-executive chairman from 1980 to 1985 and executive chairman from 1985 to November 2005 when he became chief executive.

The company serves the international banking and healthcare industries, employing around 6,000 people in more than 120 countries.

Sir Dominic said it was recognised during the talks that the failure to agree an offer acceptable to shareholders would make the position of Mr Lomax untenable.

He told shareholders: "Proposals that were made were indicative only and highly conditional.

"We made it clear to the parties involved they should put forward their best price but importantly we made them aware our position was flexible.

"Despite our willingness to be flexible the parties declined to put any price on the table. As no offer was forthcoming, we had no choice but to terminate the process without delay on Friday evening."

However, Sir Dominic's words are likely to be seen as an attempt to smooth relations with shareholders, some of whom are said to be unhappy with the way the process has been handled.

Misys holds its annual shareholder meeting tomorrow and management could be heading for a rocky ride. According to reports at the weekend, "furious" shareholders are planning a protest vote a gainst Sir Dominic's re-election.

Meanwhile, Misys accompanied news of Mr Lomax's departure with a warning that annual earnings per share will fall compared to last year.

The trading statement highlighted ongoing problems at its healthcare division, where order intake has been flagging. Finance director Howard Evans stressed that the first quarter is typically the group's softest, and said investors should be "cautious" in drawing conclusions for the full year.

Nevertheless, Sir Dominic conceded that the takeover saga may have had an impact on the overall business.

"The offer process must create some uncertainty and we mustn't pretend otherwise, but it's impossible to quantify and say what that impact has been on the business and customers.

"But there's no indication that it has been in any way dramatic," he said.

Sir Dominic, who has taken the reins until a replacement is found, said a shortlist of three or four candidates had already been drawn up, and the acting chief executive expressed confidence an announcement would be made by mid-October.

The board was looking for the ability to take over at short notice and familiarity with the industry, he said. Three former executives who reportedly hoped to stage a "management walk-in" and execute a break up of the group have been named as potential candidates.

Sir Dominic said if any of the triumvirate - Ross Graham, John Sussens and Mike O'Leary - applied they would be considered for the position.

"We recognise that the last few months have been an unsettling time for employees.

"Now that the offer period has ended, the priority for the entire board is to take the group forward and to provide excellent service to customers. The board has confidence in the long term value and future prospects of Misys."