Kape has announced the acquisition of Intego, a malware protection and cybersecurity SaaS solution, for U$16 million in cash. Intego is focused on the provision of malware protection, firewall, anti-spam, backup, data protection and parental controls software for Mac. The deal fits directly into Kape’s acquisition strategy of accelerating its growth in the cybersecurity market. It provides the Group with the opportunity to realise synergy benefits through additional sales, a lower cost structure and the application of Kape’s skill in efficient online user acquisition to Intego’s products. In paying 11.4x historical profit before tax, Kape gains ‘significant’ levels of recurring revenues from subscribers through Intego’s strong position in the malware protection market. Management expects the acquisition to be earnings enhancing in the current financial year. Our estimate changes also reflect that as we add U$0.3 million and U$1.1 million to EBITDA for FY 2018E and FY2019E respectively. We leave revenues unchanged ahead of the anticipated H1 trading update.
Intego’s website notes that it is the only software provider to focus exclusively on Apple security and has established relationships with partners to help it become a Mac security software market leader. Intego provides products predominantly to consumers with some newer solutions for businesses. It has 150,000 paying users – generated solely from organic sources - with renewal rates above 75%.
The multiple which Kape is paying for Intego of 11.4x historical PBT has a similar look to that of CyberGhost, which what acquired for up to €9.1 million in 2017 placing it on a multiple of 6x to 9x historical EBITDA (depending on deferred payments). Paying cash for Intego at that multiple versus Kape’s 2017 EV/PBT multiple of 21.5x suggests immediate earnings enhancement.
We have previously noted that CyberGhost represents a useful template for what it is possible to achieve from further acquisitions over time. The potential for significant synergies from the acquisition of Intego lie in the complementary malware protection and security solutions and the user base which both bring significant cross-sell opportunities.
In our view, the acquisition of Intego represents another solid step in augmenting Kape’s growth prospects as it continues to focus its products on being B2C-driven and SaaS enabled.