LiveTiles swoops to acquire Swiss intranet provider CYCL in multimillion-dollar deal

Software company LiveTiles (ASX: LVT) has unveiled plans to acquire Swiss intranet provider CYCL AG, a company with complementary software development projects that are expected to boost LiveTiles’ own offering.

The two companies have agreed to conduct the acquisition at a purchase price comprising of an initial tranche of CHF12.9 million (A$19 million) – made up of $6.3 million in cash and $12.6 million in stock – followed up by two earnouts of up to CHF9.0 million ($13.2 million) in aggregate.

In total, the deal could cost LiveTiles a maximum sum of $32.2 million.

At current prices and financial performance, the upfront purchase price represents a revenue multiple of 1.3x with LiveTiles co-founder and chief executive officer declaring the deal will “fast-track our product roadmap with an aligned technology architecture” and opens the door for the company to “target organisations with large deskless workforces”.

Importantly, the acquisition of CYCL is conditional on LiveTiles’ placement capacity under ASX listing rule 7.1 which will be confirmed at an annual general meeting next week. If approved, the acquisition is expected to occur on 2 December 2019.

Absorbing CYCL

CYCL has been a consistently strong performer over the past two decades by registering increasingly more customers, growing its sales revenues and hiring over 50 staff.

The company says it currently serves household name clients such as leading accountancy firm PricewaterhouseCoopers, pharmaceutical giant Roche, global oiler Shell, German tech conglomerate Siemens and the United Nations.

According to LiveTiles, CYCL represents a superb acquisition given that it wields “highly regarded services capabilities that are complementary to its product portfolio” and already has 10 active reseller partners.

LiveTiles is keen to acquire the Swiss company given its existing market position and that the two companies can combine their collective product suits to create a market-leading offering.

The ASX software company currently offers “intelligent workplace software” for commercial, government and education customers with a view to streamlining productivity, collaboration and facilitating better functioning business practices.

One of its most popular products is LiveTiles Bots, an intuitive web-based tool allowing users to create customisable virtual assistants that automate mundane and repetitive tasks and minimise human errors.

Another product it sells to hundreds of customers globally is LiveTiles SharePoint, a tool that enables teams to connect disparate business apps in an intuitively designed digital workplace, thereby generating a seamless experience across devices and between departments operating in different time zones.

LiveTiles says the CYCL acquisition will not only be technologically synergetic but will also be revenue accretive. CYCL reported $14.1 million in total annual revenue in September this year with a reported $19 million in future contracts on the horizon including “multi-year contracts” with Swiss-based non-governmental organisations (NGOs) and corporates.

Why CYCL

LiveTiles said it targeted CYCL because of its two core products, Condense and MatchPoint.

Condense is a full-service intranet software package which is mobile-focused and cloud-based – a significant deviation from existing services that require extensive implementation and on-site management.

According to CYCL, Condense allows organisations to launch and rapidly configure “pocket intranets” – a means for organisations to share information within a private network only accessible by employees.

Given the fact that Condense is mobile and cloud-based, LiveTiles said it represents a strong opportunity to speed up the sales and deployment process for its own customers and fits nicely into its current model of seamless integration of multiple software solutions.

Moreover, Condense is expected to expand LiveTiles’ total addressable market through its focus on organisations with large front-line or mobile workforces, as well as smaller organisations.

Critically, Condense enables organisations to reach front-line workers without traditional company IT account access leaving employees needing only a mobile phone to stay connected with company updates.

The benefit of delivering a stable and effective intranet solution is the positive effect on employee engagement and corporate culture across an organisation, providing content authoring and publishing, a native employee app and enterprise-grade connectivity and security.

The other significant software LiveTiles will merge into its own suit is MatchPoint, an award-winning turnkey intranet solution aimed at enterprise-wide deployments. The offering is specifically aimed at the financial services and the public sector that typically work with extremely large data sets.

In a statement to the market, LiveTiles said: “the combination of joint capabilities between CYCL’s MatchPoint product, LiveTiles and Wizdom creates an enhanced Intelligent Workplace offering which will open up greater enterprise opportunities.”

The ultimate aim is to grow its own footprint within the IT solutions sector with a specific focus on enterprise organisations seeking rapid upscale and streamlined expansion.

Furthermore, MatchPoint is built on the same Microsoft technology platforms as LiveTiles’ Wizdom offering, thereby offering strong product and sales channel synergies.

“We are genuinely excited to be joining the LiveTiles team, the global market leader in the relatively new category of intranet software,” said CYCL’s chief executive officer Patrick Pűntener.

“We are fully aligned with LiveTiles’ Intelligent Workplace vision and we look forward to realising the substantial opportunity to accelerate growth as we combine our products, teams and sales channels,” he said.