Compliance and red tape software provider Ideagen (IDEA:AIM) is closing in on several possible acquisition targets and has raised £48.7 million of fresh funding as it readies to pull the trigger.
The near-£500 million company raised the cash from investors by issuing close on 10% of new shares priced at 215p each, about an 8% discount to yesterday’s 233p closing price. The cash call included a welcome retail investor offer run over the PrimaryBid platform, worth about £1.5 million of the overall fund raise.
Shares in the company dipped 3.5% on Wednesday to 226.5p, reflecting the extra shares.
EYES ON MULTIPLE PRIZES
Ideagen told investors that it is effectively looking at a number of potential acquisitions which it believes would be ‘attractive and that could enhance shareholder value for the long-term’.
More detail will come in time and of course, there was the usual caveat that none of the deals might ultimately happen, but Ideagen has a very good track record for making savvy bolt-on acquisitions.
Nottinghamshire-based Ideagen provides a host of governance, risk and compliance information management software tools to what it calls ‘high consequence industries.’
Sectors span aviation, healthcare, defence and energy, banking/finance and complex manufacturing, with blue-chip customers including BAE Systems (BA.), Emirates Airlines, Royal Dutch Shell (RDSB), the European Central Bank, Transport for London, GlaxoSmithKline (GSK), Meggitt (MGGT) plus more than 150 hospitals in the UK and US.
This is a company Shares has followed for years, first flagging the investment opportunity to readers when the stock traded at 19p in January 2013.
TARGETING $8 BILLION INDUSTRY
The net of regulation red tape and compliance accountability is getting ever tighter around industries and organisations across the world and system and process failures can cost clients millions of dollars in fines and reputational damage, and potentially put lives at risk.
‘We’ve seen it all before’, said Megabuyte analyst Lee Prout on Wednesday, flagging the £20 million of growth funding raised in September 2018 which was followed by a stream of acquisitions. ‘Ideagen expects to do the same with a larger pot.’
The rationale for shareholders is clear; Ideagen typically targets acquisitions at around the 10-times EBITDA (earnings before interest, tax, depreciation and amortisation) post synergy while itself being valued at more than 20-times.
The business recently issued an in-line first half trading update for the period to 31 October 2020 highlighting revenues up 7% to £29.2 million driven by cross and up selling its customer base, plus there were new logo wins within the healthcare, life sciences and financial services verticals.
The company reported adjusted EBITDA up 25% to £10 million, representing an impressive 34% EBITDA margin. Around 84% of revenues are on recurring contracts.
