Building on its strategy to become Australia’s leading service provider to advice and accounting firms, Diverger (ASX: DVR) has announced it is acquiring technology services business Priority Networking for $2.25 million.
Diverger plans to fund the purchase through its existing debt facility with the first $1.8 million to be paid upon completion of the acquisition and the remaining $450,000 to be settled 12 months after the transaction – subject to Priority Networking achieving EBITA (earnings before interest tax amortisation) performance targets.
The expected EBITA contribution from Priority Networking is based on its FY2022 performance of $450,000.
A further earn-out incentive up to $450,000 is also payable subject to Priority Networking meeting an agreed uplift in the second year.
Diverger stated the acquisition of Priority Networking would help it “better serve” its 3,500 clients by “materially enhancing” its technology capability into managing infrastructure and cyber protection advice and services.
As part of the deal, Priority Networking’s principals Greg Gardiner and Jacques Louw will remain with the business and provide support to the existing client base as well as expansion efforts.
AFSL Compliance acquisition
The Priority Networking purchase follows Diverger’s acquisition of licensee support business AFSL Compliance in December last year.
Established in 2010, AFSL supports firms with an Australian Financial Services licence or that are seeking to obtain one.
“The acquisition of AFSL Compliance provides Diverger with an established client base of 160 self-licenced advice firms and deeper capability in consulting services to that market,” Diverger noted.
Diverger will pay $1.37 million once the acquisition is completed, followed by $685,000 at 12 months and again at 24 months – subject to performance targets.
A further $600,0000 is payable if AFSL Compliance meets an agreed uplift in earnings in the third year.
FY2025 growth targets
According to Diverger, both acquisitions are part of the company’s plans to meet its FY2025 growth targets.
“Licensees, advisers and accountants are seeking the support of a service platform such as Diverger, which can fill the gaps in their infrastructure, necessary to compete and facilitate cost effective advice,” Diverger chairman Peter Brook said.
Mr Brook pointed out the company had delivered strong results over FY2022, with net revenue up 9% year-on-year to $30.15 million – underpinned by recurring revenue across its core services.
Diverger managing director Nathan Jacobsen said the company was targeting net revenue of $40-45 million in FY2025 through increased sales and acquisition opportunities.
Get the wire before the market opens.
The ASX small-cap stories that matter, filed before 9am AEST. Curated by the Small Caps desk.