Converge Technology Solutions has acquired Texas-based IT solutions provider Unique Digital Technology for a valuation of 3.1 to 4.4 times EBITDA for the trailing 12-month period ending August 31, 2020. The valuation range is based on multiple earn-out variables.
This is M&A deal 404 that ChannelE2E has covered so far in 2020. See the full M&A deal list here.
The Houston-headquartered Unique Digital is primarily focused on architecting and implementing solutions in big data, cloud, data protection, networking, security, and virtualization.
Converge Technology Solutions Acquires Unique Digital: Deal Valuation and Details
Points of interest for the deal include:
- Unique Digital’s revenue was roughly $70 million for the twelve-month period ended August 31, 2020.
- Consideration for the purchase consisted of US$5.35 million in cash, US$2.4 million in promissory notes, and earn-out payments of up to US$1.5 million in aggregate, payable over three years.
- Assuming Unique Digital achieves the minimum level of EBITDA (earnings before interest, tax, depreciation, and amortization) to earn the full earn-out, the purchase multiple for the transaction would be approximately 3.1 times EBITDA in the third year following closing.
- Assuming no earn-out payments are made, the purchase multiple would be approximately 4.4 times EBITDA for the trailing twelve-month period ended August 31, 2020.
- The company will have $1.25 million of positive working capital at closing with any excess or shortfall to be settled post closing.
- The acquisition is expected to be immediately accretive to Converge, resulting in increased revenue and adjusted EBITDA.
Converge says it will look to introduce its Software Enabled Hybrid IT solutions to existing and new Unique Digital customers. It will also look to leverage Unique Digital’s cloud architecture, networking, storage, high availability, and data protection solutions related to mission-critical environments to its own North American clients, according to the company.
Unique Digital's CEO, Andy Pratt, will continue in his role along with the existing Unique Digital management team, the companies announced.
Converge Technology Acquires Unique Digital: Executive Insight
Andy Pratt, CEO of Unique Digital, commented:
"We live in a data-driven world. Companies are leveraging large pools of data to formulate their business strategy. New technologies are being developed every day and with that, more data is being created. By joining the Converge family, we are confident that Unique Digital will better serve its customers by augmenting the existing offerings and solutions. We are excited to add Converge's platform of offerings to new and existing customers. For us, it is the best way to continue to architect, implement, and support the latest technology solutions and accelerate the growth of our organization.”
Shaun Maine, CEO of Converge, added:
"We look forward to Unique Digital joining the Converge family of companies. Like the PCD Solutions acquisition earlier this year in Canada, Unique Digital brings deep VMware capabilities to Converge's US operations. With Texas containing four of the top-10 largest US cities (Houston, Dallas, Austin, and San Antonio), we expect Unique Digital's strategic alignment with Dell Technologies as a Titanium partner and highly trained technical staff to be critical assets in becoming a dominant software-enabled Hybrid IT provider in the Texas marketplace."
Converge’s Background
From its Toronto headquarters, Converge Technology provides IT solutions around North America. The company trades on the TSX Venture Exchange in Canada. As of November 2019, the company had approximately 770 employees in the United States and 80 in Canada.
Converge’s last acquisition was in February when it bought hybrid IT consulting firm PCD Solutions.
Unique Digital is the thirteenth acquisition completed by Converge since October 2017. Converge's family of companies also includes Corus Group, Northern Micro, Becker-Carroll, Key Information Systems, BlueChip Tek, Lighthouse Computer Systems, Software Information Systems, Nordisk Systems, Essex Technology Group, Datatrend Technologies, VSS, and the previously mentioned PCD Solutions.
