M&A is a bit like ‘panning for gold’. Most prospectors lose money, but the successful ones do the homework, know where to look and crucially understand their markets inside out. Similarly, we think Elecosoft - following its ‘transformational’ £2.4m acquisition of BIM (Building Information Modelling) SaaS provider, ICON back in October 2016 - has done it again.
Announcing this morning that it has purchased Shire Systems Limited, a leading UK computerised maintenance management software (CMMS) developer based in Southampton, for £5.1m on a cash/debt free basis. Corresponding to modest 2018 EV/sales, EV/EBIT and PE multiples of circa 2.5x, 6.5x and 8.0x respectively - compared to the sector on 3-5x, 15-25x and 20-30x (see overleaf).
So why are we excited? Well, the transaction is important on several fronts. Not least because it materially enhances Elecosoft’s capabilities in CMMS, used for say preventative maintenance plans of plant & equipment and facilities management (FM) – shown below under ‘operate’.
What’s more, coupled with ICON’s cutting-edge BIM solution and the firm’s other leading applications (eg PowerProject, BidCon, e-sign, etc), we reckon that there are not only considerable up/X-selling opportunities (Shire has >800 active customers serving numerous industries), but also that strategically Shire will greatly expand the group’s post construction expertise.
In turn, offering clients substantial synergies, especially as BIM becomes more ingrained within the FM world.