Sydney-based Service-as-a-Software (SaaS) provider ReadyTech (ASX: RDY) is ramping up its government tech offering after agreeing to purchase IT Vision for $23.1 million today.
The cash-and-scrip deal will see RDY acquire an additional 190 local government customers, building on its current footprint in WA, SA, NSW and Queensland. As part of the agreement, RDY has agreed to pay $11.5 million in cash.
Subject to revenue and EBITDA milestones, RDY will pay IT Vision a further $31.5 million within a four-and-a-half-year period following the completion of the transaction.
ReadyTech co-founder and CEO Marc Washbourne said the proposed acquisition is strategically important to the company’s government and justice segment.
“We have been very impressed with the level of satisfaction from a loyal customer base and the sense of a customer community developed by an experienced and committed management team at IT Vision,” Washbourne said.
“The addition of IT Vision will bolster ReadyTech’s position as a trusted technology partner to local government.
“We see considerable opportunity to cross-sell and upsell from ReadyTech’s broader product set and increase share of wallet, given the digital transformation taking place in the government sector and the cloud transition already underway within IT Vision’s customer base.”
Founded in 1991, IT Vision is a software development company that offers local governments enterprise resource planning (ERP) solutions such as SynergySoft and cloud-based program Altus.
Other offerings in the company’s product suite include business analytic tools, risk management, online timesheet solutions, finance enquiry solutions, procurement, and payroll and finance processing.
The majority of IT Vision’s 190 customers are based in WA (62 per cent), followed by SA (16 per cent), QLD (10 per cent), NSW (4.7 per cent), Victoria (4.2 per cent) and Tasmania (0.52 per cent).
RDY says the company is forecasted to generate a revenue of $12.5 million and an EBITDA of $2.5 million in FY22.
“The transaction has been structured to incentivise integration, revenue and earnings growth, as well as growth in recurring revenue contributions through contingent considerations against performance milestones and partial use of scrip,” ReadyTech said.
The acquisition of IT Vision - which has 55 offices across its offices in Perth, Adelaide and Melbourne - builds on RDY’s previous purchase of government software specialist Open Office in November 2020 for $72 million.
The deal saw RDY enter the local government software sector and fork out $54 million in cash to Open Office, in addition to an earn-out sum of $18 million.
RDY has affirmed its guidance for FY22, with the recent acquisitions of procurement software Open Windows, student management solution AVAXA and recruitment software Phoenix HRIS expected to contribute $2.4 million in revenue.
Originally known as JobReady, RDY was founded in 1997 and listed on the ASX with a market capitalisation of $120.8 million in April 2019.
The latest acquisition is expected to complete by 31 July 2022, subject to the satisfaction of conditions and regulatory approvals.
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