ASX-listed IT services provider, ASG Group (ASX: ASZ), has acquired SAP partner, Progress Pacific, for about $12 million.
Progress has offices in Sydney and Melbourne with more than 40 employees, all will be retained in the buyout, including its CEO, Robin Apfel. The company’s branding will also remain for now. The acquisition will propel ASG into being one of the first accredited SAP partners for SAP SaaS.
The total purchase price is based on a multiple of five times average pre-tax earnings for the 2011 and 2012 financial year, capped at $12 million.
This will be worked out in the form of 50 per cent cash and 50 per cent scrip that is payable across two instalments of 25 per cent upfront with the outstanding 75 per cent to be paid in September 2012.
The first scrip will be issued at $1.25 and the second component will be calculated on a 20-day volume weighted average price period prior to payment date.
The cash component will be funded by a combination of existing cash reserves and debt.
The purchase amount will be subject to Progress meeting certain performance benchmarks over time to ensure the acquisition will be earnings accretive for ASG.
ASG general manager sales and delivery, Murray Rosa, said the acquisition would see ASG expand its SAP presence in key growth markets on the east coast.
“It’s no secret in what we’ve been trying to do in the SAP world. We wanted to get into the market space and our intention was to buy capability to penetrate the market place, because at the moment ASG is predominantly in the Oracle world,”
Rosa told ARN. “We’ve never really been in the position to pursue SAP type business, so we see this sort of acquisition really offering the opportunity for us to double the size of ASG if we do this right.
“We see a huge opportunity along the eastern seaboard to continue the resources chase as well as the government sector.”
Rosa said some of the benefits that ASG brings to the table for Progress Pacific are end-to-end capabilities.
“We can provide managed services around their professional services business and we’ve got a datacentre they can leverage,” he said.
Some of Progress' clients include Broadcast Australia, Device Technologies, Fresenius Medical Care, George Weston Foods, IAG, ING, Kimberly-Clark, Pepsico and Smith.
Rosa said it would still consider further acquisitions, if its fits into its chosen markets and focus areas.
ASG began building out its SAP capabilities through the purchase of Courtland in Western Australia in April this year.