Global software company LiveTiles (ASX: LVT) is looking to push its “intelligent workplace” product suite a step further after it agreed to acquire the entirety of Denmark-based Wizdom, a highly complementary and fast-growing software business with a strong European footprint.
According to LiveTiles, its acquisition target is currently cash-positive and will generate both logistical and financial benefits.
The purchase price comprises a base valuation and an earn-out, with an aggregate purchase price cap of €30 million (A$48 million).
To fund the deal, LiveTiles has launched a placement of shares to institutional and other sophisticated investors to pay the $9 million upfront cash consideration and a placement for working capital purposes.
Under the placement, a minimum of $15.3 million will be raised (before costs) via the issue of 45 million fully paid ordinary shares.
The rationale underpinning the deal is that Wizdom is an award-winning “plug and play” digital workplace that is aligned with US-giant Microsoft’s existing software ecosystem.
The fit between the two companies means that LiveTiles can capitalise on developing tools for Microsoft’s digital workplace software range and leverage its market position to court the growing demand for next-generation applications that are set to revolutionise modern business.
One such area is artificial intelligence which is set to expand both working capacity and efficiency for businesses in all industries including far greater optionality over and above existing practices.
Two years back, Wizdom claimed the Gartner 2017 Cool Vendor award for its technology with cross-company compatibility between itself and LiveTiles cited as a key caveat that will create complementary product capability with opportunities for “interoperability”.
Some of the other benefits from the deal will also be financial in nature.
The acquisition is expected to add 35% to LiveTiles’ annualised recurring revenue (ARR) to generate a combined tally of almost $31 million.
The deal also sports an attractive acquisition multiple of 3.5-times base value with 3-times ARR expected to be generated when the earn-out is included.
“Wizdom will enable us to broaden the LiveTiles intelligent workplace platform to deliver exciting new capabilities to current and future LiveTiles customers. At the same time, LiveTiles’ leading artificial intelligence capabilities provide a significant cross-sell opportunity to Wizdom’s growing customer base across Europe,” said Karl Redenbach, co-founder and chief executive officer of LiveTiles.
Wising up for the future
Wizdom’s software provides users with the tools needed to drive employee engagement, collaboration and compliance and is expected to enable LiveTiles to deliver new capabilities in relation to news and content publishing as part of its intelligent workplace platform.
As part of the acquisition, LiveTiles confirmed that Wizdom founders John Wainer and Claus Ole Hasle will join its ranks to drive the continued growth of the business they founded back in 2016 – to play a key role in helping LiveTiles advance its position as the leading intelligent workplace platform.
At the end of last year, Wizdom had ARR of $8 million and wielded a customer base of 243 clients across Europe and the United Kingdom.
The company’s customers include large-cap firms such as Nokia, Syngenta, Saxo Bank, De Beers and resources giant Anglo American.
Acquiring Wizdom provides LiveTiles with an immediate and established a regional presence in Europe, fast-tracking the company’s expansion in the region.
“John and Claus are pioneers in digital workplace software and can bring a deep level of expertise in the Microsoft ecosystem with decades of operating experience in European markets,” LiveTiles stated.
One of the pair’s core achievements was moving Wizdom towards positive EBITDA in both 2017 and 2018 while generating strong recurring revenue growth figures.
Furthermore, Wizdom is well-advanced in successfully transitioning from a consultancy-led business to a high-growth software-as-a-service business – a transition that is highly-suitable for LiveTiles.
“LiveTiles and Wizdom offer highly complementary products focused on providing our customers with intelligent technology solutions,” said Mr Wainer who is chief executive officer of Wizdom as well as co-founder.
“We are excited to be joining forces with the LiveTiles team and believe that both companies will be able to leverage their respective customer footprints, established partnerships and sales and marketing channels to drive rapid growth across both businesses.
“I am confident that within Wizdom’s existing customer base there will be strong interest for LiveTiles’ existing AI capabilities, providing us with immediate cross-selling opportunities and a compelling product offering to attract new customers,” said Mr Wainer.