Analysts believe
-Deal cements a tender partnership
-Fill the gaps in
-Strong cross-sell opportunities
The acquisition, announced last Friday, was completed on
Management says the deal is expected to deliver recurring revenue of about
Analysts at Macquarie, Wilsons and Jarden believe the acquisition was struck on a very attractive multiple and represents a good strategic fit for the company.
They note the purchase fills gaps in
Open Windows SaaS business sells its Modular Procurement Suite to more than 80 public and private-sector customers. It contains source-to-contract management modules covering the contract lifecycle from tenders, compliance, contracts, supplier relationship management (SRM) and sourcing.
Jarden notes the price was struck on a 2.9x multiple of forecast annual recurring revenue of
The only general challenge in Jarden's view is that management's guidance of
Deal cements tender partnership
The two companies have previously tendered in partnership to fill gaps in the
Macquarie likes that Open Windows' founders will remain aligned and expects upside from revenue synergies.
Acquisition fills gaps in
For this reason, Wilsons believes the main aim of the purchase is to beef up
"Post-integration, we believe Open Windows and Open Office will form a more comprehensive one-vendor, single-source solution," says Wilsons.
Macquarie expects a boost for tender win rates from an expanded product offering post acquisition
Macquarie says this improves
Strong cross-sell opportunities
Macquarie notes there is very little customer overlap between the companies, offering strong cross-sell opportunities to
Macquarie raises FY22, FY23 and FY24 EPS forecasts 1%, 2% and 2%. Target price rises to
Macquarie increases its target price to
Wilsons holds an Overweight recommendation and
The broker retains a target price of
The deal within context
In August,
About 87% of revenue came from recurring subscription contracts and customer retention was 96%.
Management guided to organic revenue growth in the mid tends for FY22 and an increase in the EBITDA margin between 36% and 38%.
The share price peaked at
But it has retreated roughly 12% in the past month as euphoria subsides; and as the appetite for growth stocks wanes as inflation fears wax.
Announcing the acquisition,
"Open Windows has a strong reputation for its modular SaaS-based approach, unique workflow process design, modern user interface and ability to handle the complex requirements of multiparty contract management and procurement supply chains.
"Open Windows further fortifies Ready Tech's product-market fit and is suitable to cross-sell to a broad range of our customer base. In particular, Open Windows' focus on local government makes it a highly strategic and compelling fit for our Government & Justice segment."
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