Listed technology group Adapt IT has announced it will acquire specialist software firm CQS Investments for R216,8m.
CQS Investments is a 20-year-old company with 4 000 clients across 30 countries. It develops its own software and distributes software developed by third-party companies CaseWare, ACL and Confirmations.com.
It offers solutions for audits, data analytics, control monitoring, risk management and financial reporting to financial professionals, the corporate sector and government, Adapt IT said in a statement to shareholders.
“CQS Investments, which has the reputation of being a leader in this niche market, also services clients in Nigeria, Kenya, Zambia, Tanzania, Botswana and Zimbabwe through a direct and a distributor network,” it said.
Adapt IT CEO Sbu Shabalala said the acquisition will help the company expand in Africa north of South Africa. About 10% of its revenue is currently generated from the rest of Africa; Shabalala hopes to grow this to 30% in the next three to four years.
The entire CQS leadership and operational teams will remain with the business, Shabalala said.
Adapt IT said the acquisition is in line with its strategy of targeted acquisition-led growth.
“It will augment the company’s financial services and public sector markets’ representation by providing diversification into the auditing and accounting professions and will enhance its technology diversification,” it said.
Adapt IT will pay CQS shareholders a total of R159,9m in cash and R56,9m in shares. It will also take on a “hefty interest bill”, which will take two years to pay off, according to chief financial officer Tiffany Dunsdon. Dunsdon declined to quantify the size of the bill.
The deal is subject to approval by the competition authorities. It must also get the sanction of “third-party loan providers to certain entities within the CQS Investments Group” as well as “key software principals, including Capital Confirmation International, CaseWare International and ACL Europe”.
The value of the net assets that are the subject of the acquisition was R67,7m at end-February 2015. The earnings before interest, tax, depreciation and amortisation attributable to these assets was R35,7 for the 12 months ended February 2015, while the profit after interest and tax amounted to R10,7m over the same period.
In the long term, Adapt IT hopes to build a “leading software and services vendor business focusing predominantly on providing intellectual property and software to the rest of the world, utilising South Africa as our base to build technologies and sell them across the world”, Shabalala told TechCentral in a phone interview on Monday.
Adapt IT’s share price was last quoted at R10,90, up by 1,4% on the session. — © 2015 NewsCentral Media
- The writer holds Adapt IT shares
