Tomizone (ASX:TOM) expects to garner an additional A$1 million in annual revenue after inking a deal to acquire a New Zealand-based managed services provider (MSP).
Tomizone, which is publicly-listed on the Australian Securities Exchange (ASX), revealed on 26 February it had signed a Heads of Agreement to acquire the as-yet unnamed MSP and internet service provider (ISP), dropping few hints as to the identity of the target company.
“The acquisition will add additional services and increase the company’s client base,” Tomizone told shareholders in a statement. “The acquisition is consistent with the company’s strategy of strong growth through acquiring businesses that provide services that can be integrated into Tomizone’s current product offerings.”
Importantly, the company said that the acquisition would see its customers get access to ISP services and products that are not currently part of its existing product portfolio, while also providing Tomizone with about $1 million in additional revenue per year.
“The ISP company will provide upwards of $1 million in additional revenues on an annualised basis. The business is profitable and includes recurring revenue streams relating to VoIP services and other similar managed services,” the company said.
Tomizone also flagged that, as with previous acquisitions, additional “synergies and revenues” have been identified, indicating that the acquisition target’s staff will be rolled into its own ranks.
“As part of the terms of the agreement, key staff of the ISP company will join Tomizone in key technical and sales/customer support roles, strengthening the Tomizone team’s capabilities,” the company said.
While the transaction under the current agreement is legally binding for the two parties, its completion remains conditional on due diligence outcomes, along with shareholder and regulatory approvals.
Although the value of the deal is yet to be disclosed, Tomizone said the transaction will be settled with shares, and includes an earnout provision based on the growth of the business over the next two years.
The latest acquisition deal represents yet another rung in Tomizone’s climb to becoming a full-blown MSP. The company was founded in 2006, making a name for itself as a provider of connectivity, analytics, monetisation and location-based services to enterprises and public venues.
In 2017, the company boosted its core service offering, becoming a full-scale managed services provider in the process.
Much of the company’s MSP retrofit came as a result of strategic acquisitions, with its expansion of capabilities being supported in part by its acquisitions of Bluesky Online and Ironman, also based in New Zealand, in 2017.
In early February, the company indicated that its appetite for new investments with which to boost its portfolio and geographic reach had not yet been sated, and that it had already approach other potential acquisition targets.
“In addition, the company continues to seek value accretive acquisitions in both Australia and New Zealand,” Tomizone told shareholders at the time.
“Whilst no binding agreements have been entered into at this stage, the company has identified several suitable acquisitions and continues discussions with those businesses.”
Just days later, Tomizone was forced to defend its ability to continue operating after the ASX, as part of its ongoing compliance mandate, questioned the company’s ability to keep trading following at least two quarters of losses.
The company released its latest quarterly results on 31 January.
While it reported a “strong outlook” in terms of revenues, it reported a $692,000 net cash loss from operating activities for the three-month period ending December 2017.