Listed education and workforce SaaS company ReadyTech has announced plans to acquire leading government software provider Open Office for $72 million.
Under the proposed acquisition, ReadyTech will pay an upfront consideration of $54 million and an earn-out consideration of up to an additional $18 million.
ReadyTech, a leading provider of mission critical people management systems across the education and employment sectors, said Open Office complements its existing software platforms and would accelerate growth by providing entry into the local and state government and justice sectors.
A leading government and justice case management SaaS provider, Open Office has 130 customers across both Australia and the United Kingdom and a client retention rate of 95 percent. It operates the Open Office brand within local and state government across financial, asset, community, and compliance management and under the McGirr brand within the justice sector.
ReadyTech CEO Marc Washbourne said Open Office is a high-quality business within resilient markets with long-term government funding.
“The acquisition opportunity is consistent with ReadyTech’s strategy to acquire complementary technologies, focus on new and attractive verticals and target higher value customers.”
“Gaining access to government and justice clients allows ReadyTech to unlock the potential of servicing a new market and adding a third pillar to our operations. We would leverage their experienced management team and capabilities to increase our market share in new markets. It would also deliver incremental recurring revenue to ReadyTech’s existing strong subscription revenue streams.
“The Open Office acquisition provides ReadyTech with an opportunity to secure a strong foothold into all levels of government in Australia, with the benefits of long-term, sustainable client base with strong barriers to entry. Entering a market of this type requires the type of expertise for which ReadyTech is renowned.”
To help fund the acquisition, ReadyTech has announced a fully underwritten institutional Placement of approximately $25 million at $1.88 per new share – a 6.2 percent discount to the three-day VWAP. Underwritten by Wilsons, the Placement is expected to settle on 11 November 2020. A share purchase plan of around $4 million is also likely in 2021.
As Open Office is majority owned by funds managed by ReadyTech’s largest shareholder, Pemba Capital, the transaction is subject to finalisation of ReadyTech’s due diligence, agreement of transaction documentation and final approval of ReadyTech’s Independent Board Committee. It will also be subject to regulatory and shareholder approval.
If completed, the acquisition is expected to be low double-digit EPS accretive in FY21 on a pro-forma basis before synergies and excluding integration costs.
If the acquisition of Open Office does not proceed, ReadyTech said it will use the proceeds from the Placement to fund other growth opportunities, including potential M&A.
