AD1 Holdings (ASX: AD1) is set to acquire “leading” mentoring software as a service platform provider Art of Mentoring, with the acquisition expected to create a more diversified recurring revenue stream to the combined entity.
According to AD1, the annual recurring revenue stream totals about $1 million, with Art of Mentoring also possessing “excellent growth outlook” along with sales synergies with its own career platform.
Under the acquisition, AD1 will issue a $1 million up front cash payment and a further $500,000 in shares.
Additional cash and scrip-based earn outs are provided for in the agreement over two tranches. These will be based on achieving revenue growth targets.
On completion of the deal, AD1 will own 100% of Art of Mentoring.
AD1 chief executive officer Prashant Chandra said one of the company’s priorities was to increase shareholder value through earnings per share accretive acquisitions.
“Art of Mentoring is a compelling strategic fit for the company with a cutting-edge SaaS product, diversified recurring revenue stream and strong growth prospects.”
“Our complementary customer base will enable the company to expand its footprint within both the government and professional association sectors,” Mr Chandra added.
SaaS mentoring acquisition rationale
Art of Mentoring’s SaaS business designs, implements and provides mentoring services to organisations.
The services are underpinned by evidenced-based programs, expert consultants and software.
Art of Mentoring’s services are formal programs and AD1 claims they “facilitate an enjoyable and productive experience” for both mentors and mentees.
AD1 estimates the employee experience software market is worth about $18.2 billion, with Art of Mentoring’s solution “uniquely suited” to address this market’s growing need for structured mentoring programs.
Art of Mentoring’s SaaS solutions are already embedded within government agencies, professional associations and large corporates.
Mr Chandra said part of the acquisition rationale was expected sales synergies across the combined group, with Art of Mentoring’s product complementing AD1’s career platform.
Additionally, the growth potential and the recurring revenue model support AD1’s expansion strategy.
As part of the acquisition, Art of Mentoring founder and managing director Melissa Richardson and her team will lead the mentoring SaaS division of the combined business.