Video technology developer Atomos (ASX: AMS) is set to acquire UK-based Timecode Systems, a prominent company that enables accurate wireless synchronisation of multiple video and audio devices.
The acquisition will cost Atomos £3.02 million (A$5.68 million) in cash and the issuance of more than 9.2 million Atomos shares.
According to a regulatory filing, the deal will serve as a springboard for Atomos to “grow its core business, maximise sales opportunities and pursue growth opportunities through strategic organic options or mergers and acquisitions”.
In order to complete the deal, Atomos has conducted a $22.56 million capital raising in Australia by issuing 17.36 million shares at $1.30 each.
The video tech company said it would complete the placement in two tranches with 15.3 million shares issued under its existing placement capacity and the remaining 2 million shares as part of a second tranche. A move that still requires shareholder approval to be obtained at the company’s forthcoming annual general meeting.
A key component of the deal is that Atomos will welcome Timecode co-founders Paul Scurrell and Paul Bannister to its team.
The duo will bring the entire Timecode staff with them and will continue to manage the integration process while driving revenue growth.
The rationale for the deal is based on Atomos’ aim of delivering a streamlined and wireless video and audio synchronisation system.
Traditionally, accurate timecode synchronisation of video and audio footage from multiple devices has only been possible by using cables linked to each separate device. This process was considerably cumbersome, time-consuming and required specialised knowledge and equipment.
When done inaccurately, synchronisation and frame timing issues arise and lead to poor production quality where audio and video are out of sync.
For both amateur and professional producers, even the smallest misalignment can mean the greatest of both tangible and intangible cost. Given the technical complexity, the process of accurate synchronisation has traditionally been left to professional video producers.
However, Timecode has developed a method of simplifying the process and making it rudimentary as opposed to complex.
The company’s technology was described as “the next evolution for the industry” by Atomos, enabling multiple devices to be wirelessly synchronised using precise timecode and metadata information.
This provides content creators with greater flexibility and improved workflow while delivering cost savings.
One key deliverable that Timecode’s technology creates is democratising content creation and allowing amateur videographers to generate professional-level results.
According to Atomos, Timecode has patented its technology and following the takeover will be “highly complementary” to its existing operations. Furthermore, Atomos is an existing licensee of the technology and already offers a separate synchronisation module as part of its AtomX range.
The acquisition is expected to be completed by the end of December 2019 with all technical integrations between two companies to occur soon after.
Synchronised technology commercialisation
Looking forward, Atomos is already considering how to commercialise Timecode’s technology and said that the technology has achieved “early traction” with a number of audio/video device manufacturers which could mean either hardware module adoption or software incorporation for Timecode’ patented Bluetooth protocol.
“The world’s leading camera manufacturers and software editing providers have been demanding an integrated Sync solution to satisfy the unmet needs of both professional and consumer users,” said Mr Scurrell.
“Not only is the Atomos-Timecode relationship already perfectly aligned, but by coming together, we will enable consumers and professionals to do more of what they love to do, be creative and engaging with high-quality videos, but without the annoying time-consuming activities,” he said.
To date, Timecode’s solutions have been adopted by major broadcasters including the BBC and ITV in the UK as well as NBC Universal in the US.
Atomos declared that Timecode’s synchronisation technology has been field-tested on major feature films such as The Avengers, James Bond Spectre and Mary Poppins as well as action sport events such as NASCAR.
From a financial perspective, Atomos expects the acquisition to boost product commercialisation, increase sales and create multiple cost synergies.
“Timecode’s current revenue is growing as the technology continues to be commercialised, with the business expected to be earnings accretive in FY 2021, following significant revenue growth,” the company said.
Atomos chief executive Jeromy Young explained that the primary rationale for the acquisition is the value Atomos can realise from the intellectual property and “effectively accelerating and increasing its commercialisation”.
“It is management’s view that to own this patent would help transform Atomos as it continues to push into the social market segment.”
“A focus for us is providing customers with a seamless user experience, which benefits Atomos by creating a sticky customer base, and the acquisition of Timecode will feed into this dynamic,” said Mr Young.
This morning’s news boosted Atomos shares by 3.5% up to $1.465.