Idox announces £5m acquisition of Halarose Holdings

Supplier of specialist information management solutions and services Idox (LON: IDOX) has this morning announced the acquisition of Halarose Holdings, a supplier of electoral back office software and services to UK local authorities for £5.0m. The deal comprises £3.5m in cash and £1.5m in shares.

This acquisition roughly doubles Idox Elections customers and positions the group as the UK’s second largest supplier of electoral back office software and services. Idox is paying a c. 4.5x LTM EBITDA multiple, about half the multiple it is trading on, for a business that significantly strengthens its existing position in Elections.

It also paves the way for cross selling to existing and new customers in the UK and Europe.

Singers have released a note this morning upgrading their EPS forecasts for FY18 and FY19 by 2.7% and 2.3% respectively.

Shares are trading marginally up by just 1% off the back of the announcement. 

Halarose is being acquired debt-free and cash free, with Management noting:

"They have been consistently profitable, delivering double digit annual organic revenue growth last year. The acquisition is expected to be earnings enhancing in the first full year of ownership." 

The Group is operating at a PE ratio of 13x against an industry median of 18x despite revenue, Operating Profit and Net Profit rising steadily in the three years to 2016. Operating margins, however, have stayed around 16% in the same period.