Proactis Back on Acquisition Trail, Acquires Dutch Firm Esize

We missed the announcement from Proactis last week so this news is not hot off the press, I’m afraid. In a two-part statement, the quoted spend management firm gave an indication of their full-year results and announced the acquisition of Esize, a Netherlands based procurement software business. (The firm is not actually based in Amsterdam, despite our picture, but we didn't have one of Veesp, where they are based)!

In terms of the results, the firm “expects to report revenue of approximately £52 million and Adjusted EBITDA of approximately £17 million for the year ended 31 July 2018. Further, deal intake was strong with 64 new names with a total initial contract value of £8.7m (2017: 54; £4.1m) and 119 (2017: 110) upsell deals”.

You may remember a few months back Proactis announced somewhat disappointing half-year figures in terms of growth rate in particular, which caused a major slump in the share price. This new announcement suggests things have at least stabilised, which was reflected in the new announcement causing little change to the share price last week – and it is still way down on where it was 6 months ago.

We have heard of Esize, but can’t claim to “know” the SaaS firm or the product really. The business has approximately 60 customers across the private and public sectors and approximately 50 employees. It has grown steadily at around 10% annually and is profitable according to the statement, which is confirmed in the claim that the acquisition will be “immediately earnings enhancing”.  Its solutions “cover the full procurement cycle for indirect spend and provide Proactis with additional capabilities in the travel and expense management and contract labour markets”.

Esize has revenues of around €5.1 million, EBITDA of €1.7m and Proactis is paying “a maximum of €15.2m” (so presumably there is some element of earn-out for the Esize owners). That gives acquisition cost ratios of three times revenue and less than ten times EBITDA, which sounds like a pretty fair price and potentially a good deal for Proactis. We will have to wait and see what it means in terms of integrating the products (or not).

After the massive acquisition / merger with Perfect Commerce a year ago almost exactly, this appears to be another example of the previous sort of deal which built Proactis shareholder value rapidly from 2013 until the recent drop. The firm made a number of relatively small acquisitions that extended the product range, brought in a new customer base, and were generally profitable firms that would enhance rather than put pressure on earnings per share.

Esize seems to fit that bill too – however, investors will no doubt be more interested in Proactis getting back onto the expected (or hoped for) revenue track, with double-digit annual growth, as we get into the 2018/19 financial year.

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