4th textbook acquisition at attractive price
Spending money on acquisitions is relatively simple. Doing it wisely is the tricky part - requiring expert domain knowledge, an experienced management team, strong integration skills and importantly a sharp eye for value creation.We think KRM22 has all these vital ingredients, and today announced its 4th textbook acquisition in under 12 months. This time agreeing to purchase Object+ Holding BV for an initial $1.15m (split: $500k cash & $650k equity at 85p, or 606.9k shares), plus a $2.75m earnout depending on future Annualised Recurring Revenues (ARR).
Object+ is headquartered in Amsterdam with another office in Chicago - generates ARR of c. $550k from 8 institutional clients - and develops P&L, margin (eg collateral) and pre-trade order limit management software. Elsewhere, the firm’s post-trade services support electronic gateways to >30 exchanges throughout Europe, North America and Asia. Whilst its leading Risk Monitor application assists clearing houses/members, traders, brokers et al, in making real-time decisions based on risk-adjusted returns.
What’s more, Object+ should shortly become profitable (vs £50k loss in 2018), and we expect the deal to be materially value-accretive given the complementary fit. For instance, KRM22 already offers post-trade market risk software. Meaning the transaction will extend and deepen coverage within the ‘pre- & at-trade’ areas, offering direct connectivity to most major exchanges. Moreover, there should be further R&D, customer and up/cross-selling opportunities.
In terms of the numbers, Object’s revenues are running at around $1.1m pa (£0.9m), of which approx. 50% is recurring. Thus putting the transaction on a modest EV/sales multiple of 1.05x – excluding deferred consideration. More importantly, we estimate the acquisition pushes KRM22’s total ARR to >£3.8m. Completion is expected early next week.
KRM22 PLC. KRM22 plc is a United Kingdom-based closed-ended investment company. The Company's objective is creating value for its investors through the acquisition of or investment in and subsequent growth and development of target in the technology and software sector. The Company may invest or acquire globally, including emerging markets, and its short-term focus is on the United Kingdom, Europe, North America and Asia.
Equity Development enables companies to become better understood and supported by investors. Since our launch in 1996 we have consistently focused on helping our clients improve their communication and relationships with both existing and potential shareholders. Our clients have come from a wide variety of sectors and domiciles, are both private and quoted and range in size from micro-cap to $multi-billions. We offer free access to company research notes written by experienced analysts. These notes include detailed forecasts, financial models and a fair value. We host regular Private Investor Forums at which investors have the opportunity to hear company directors present, and to ask questions. These are free to attend. We broadcast live Webinars with company management that include active Q&A. We also make the recordings available online. We arrange face to face meetings between private investors and company management. We are active users of Twitter, commenting daily on company news, share price moves, Directors’ Dealings, Equity Development Research Notes & Events.
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