Canberra-based managed services provider, Citadel Group (ASX:CGL) has acquired software and services company, Kapish for about $17.5 million.
An initial payment of $12.5 million will be funded from available cash and two additional payments totalling $5.25 million across tranches two and three (year 1 70 per cent, year 2 15 per cent and year 3 15 per cent).
The acquisition is set to close on June 30 and Kapish will maintain its company name, becoming a wholly owned subsidiary of Citadel, which has about 250 full time staff and about 100 contractors.
Kapish is a specialist in HP TRIM and HPE Records Manager, being one of only two Australian Gold business partners for this specialisation along with Optus. It has about 180 clients that stretch across local and state government agencies with an annuity-style revenue base due its IP in content management and software integration.
Citadel Chairman, Kevin McCann, expects Kapish to add $4 million of EBITDA in FY17.
“Going forward, Citadel will continue to explore acquisitions where appropriate to support its known organic growth opportunities,” McCann said.
In a statement, Citadel COO/ deputy CEO, Darren Stanley, said the acquisition was immediately EPS accretive pre-synergies and increases Citadel’s proportion of recurring revenue contracts.
“Kapish is a natural augmentation to Citadel’s existing knowledge management capabilities and significantly expands our market share in local and state governments,” Stanley said.
As a result of the acquisition, Citadel has also increased its long standing investment in filosoph-e to 50 per cent. Filosoph-e is a collaboration of organisations and individuals in records, electronic document and information management sectors.
The increased holding and acquisition of Kapish will give Citadel the boost to actively target new markets and customers with software-as-a-service and Cloud offerings, which enable organisations to capture, manage, access, and secure documents and records from creation through to disposal.
Citadel’s R&D investments are also beginning to payoff with the company being shortlisted for a number of large contracts leveraging its IP to authenticate identities, manage and distribute information across sensitive and secure environments.
Citadel managing director/CEO, Miles Jakeman, said its growth strategy was underpinned by a combination of organic growth and M&A activity.
“With a strong pipeline of organic growth opportunities that will continue to be supplemented through further acquisitions, Citadel is well placed to continue its growth trajectory,” he said.
In other news, Citadel’s health division has also signed a three year contract renewal until 2019 with Pathology North for the provision of complex laboratory information systems, database integration work and delivery and support of new capabilities including blood management (e-Blood).
The contract also comes with two additional one year extension options and the fully managed service also includes software applications, infrastructure and service desk support.
The contract builds on Citadel’s clients in the health sector, which also includes Queensland Health, Eastern Health and The National Blood Authority’s BloodNet system, which allows national blood and blood products information to be shared with Citadel’s AUSLAB system.
Jakeman highlighted its health division was tracking ahead of expectations, particularly at the time of its PJA acquisition, and success with the e-Blood product suite and other associated health workflow interfaces that will open up further domestic and foreign market opportunities.
Citadel purchased Melbourne-based health services provider, PJA Solutions last year in a deal worth $60 million.