Human resources and profiling tech company ReadyTech (ASX: RDY) is poised to instantly enter the justice sector through the acquisition of Open Office and their clients in Australia and the United Kingdom.
A software provider for Government agencies and public offices, Open Office offers case management software for the justice sector with the tech being complementary to ReadyTech’s existing products which serve the education and employment sectors.
“Open Office is a high-quality business, providing solutions to 130 government and global justice clients, with a client retention rate of approximately 95%,” said ReadyTech CEO, Marc Washbourne.
“Gaining access to government and justice clients allows ReadyTech to unlock the potential of servicing a new market and adding a third pillar to our operations. We would leverage their experienced management team and capabilities to increase our market share in new markets.”
“The acquisition opportunity would also deliver incremental recurring revenue to ReadyTech’s existing strong subscription revenue streams.”
Total upfront consideration for the acquisition will be $54 million payable, comprising $40.1m cash and $13.9m RDY shares. A further $18m is then payable if revenue targets are met over the next 4.5 years.
To fund the cash component of the acquisition, ReadyTech has announced a capital raise seeking $25m from institutional investors with a Placement Offer Price of $1.88 per new share.
Founded 20 years ago, Open Office has assisted all levels of government digitise their asset management, community and finance systems and currently has approximately 130 customers primarily consisting of government organisations and global Ministry of Justice departments.
Operating with a Software-as-a-Service business model, Open Office is expecting FY20 revenue to be around $16.8m with EBITDA margins around 35%.
Through FY20, ReadyTech reported a 19.1% increase in revenue to $39.3m and 63.9% increase in underlying NPAT to $3.6m.
As the world returns to normality in the coming months, ReadyTech is expecting strong performance from their Workforce services division through global economic recovery. This will be aided by the Federal Government’s $2 billion JobTrainer Skills package which aims to deliver 340,000 new training places.
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