Climb Advisors Weekly M&A Deals Newsletter

The Week in Review

Author

Nick @ Climb
November 26, 2023

Welcome to Climb Advisor’s weekly deal newsletter highlighting transactions announced last week across the B2B tech landscape.

Climb Advisors is an M&A advisory firm focused on B2B software and services companies in the range of $5m to $50m+ enterprise value. We guide CEOs and business owners through the process of selling their business & assist investors in sourcing & closing great deals. We love to talk markets and share beneficial information - please reach out any time.

Aptean expands European operations with deal for 3T Logistics & Technology Group

Overview: Aptean provides mission critical software solutions, with this deal for 3T expanding their transportation management offerings. The UK based startup, which staffs over 150 employees, provides a platform that helps shippers and carriers reduce costs and improve their services, through automating processes and attaining real-time data on all aspects of their shipping operations. Their tech will also complement other services provided by Aptean such as ERP and Supply Chain Management solutions. Read more here.

Climb Comment: Great deal for Aptean both as a scale and tech play, and importantly, as a footprint into European markets. Transportation & logistics fundamentally require heavy interface with the physical world, and things we take for granted become quite challenging in different geographies. Acquiring into a local market gives Aptean power to drive growth for both regional and global customers.

Tenax Solutions acquired by IP Pathways

Overview: The addition of Tenax Solutions and their team of 6 will bolster IP Pathways’ cybersecurity services, with the former offering vulnerability scans, penetration testing, and compliance examinations to enterprise clients. As cybersecurity comes under increased scrutiny, it is vital providers of cloud and other tech solutions such as IP Pathways can assure clients that their data is in safe hands. With this deal the acquirer gets a quick and efficient fix to a key issue, once again highlighting the benefits of M&A. Read more here.

Climb Comment: Pen testing and offensive cybersecurity are huge markets as organizations seek to mitigate risk of an ever-growing range of digital threats. Seems that Tenax has largely focused on partnering with MSPs as a sales channel, seems this could be an excellent ‘plug & play’ deal for IP Pathways.

Neptune Wellness enters into LOI to acquire Datasys

Overview: The CPG company which focuses on plant-based, sustainable and purpose-driven lifestyle brands, has acquired Datasys, a data-marketing startup that has compiled one of the largest consumer and business data sets in the world. Datasys uses AI and ML to analyze this data set, helping companies target their ideal customer whilst also providing marketing solutions based on these results across multiple channels. Total consideration for the deal was $112m, with $20m cash at closing, with Datasys posting 2022 revenues of $25.2m and EBITDA of $9.1m in 2022. Read more here.

Climb Comment: Interesting transaction on a number of levels. First — a CPG brand acquiring a data analysis platform. It’s a bold move that makes sense in many ways, ie Neptune could likely spin up new brands & products based on the data trends, and Datasys is profitable at a scale that would have material impact on Neptune. Neptune had EBITDA this year (trailing twelve as of Q3) of around negative $45m on $53m in revenue.

12x EBITDA headline on the deal with heavy structure. $20m in cash at close, which still needs to be located by Neptune, who show around $5m in cash on the balance sheet as of September ‘23. Then there’s $32m in restricted shares, payable in three dispersals over 30 months, then a $31m PIK seller note (7% interest on a 5 year balloon with a 25% early payoff discount) and lastly an earnout of $5m-$22m based on 2024 EBITDA targets of $13m-$16m.

Digging a layer deeper we have to assume that ‘23 EBITDA for Datasys is up from $9.1m. Any number we’d suggest would be conjecture but would place it between $9m & $13m. If we split the difference and call it $11m we’re looking at more like a 10x multiple, with just less than two turns in cash at close. Not a screamer for Datasys in the guaranteed piece by any means but a solid deal, and plenty of upside potential if they believe in the story & the growth.

To stray a little further into conjecture — this is an interesting move by both parties because there is little to lose by announcing this deal at LOI stage. Sure, someone could come in and swoop Datasys before close, and sure Neptune loses some credibility if they don’t close it for other reasons. But it signals to the market that both parties are willing to play ball — that Datays is willing to transact in a ballpark range and that Neptune is looking to grow via M&A and has the ability to get creative on structure and aim for targets with some scale.

Will be interesting to see how this plays out, we will monitor and revisit.

Kiteworks announces deals for ownCloud, Draycoon and Maytech to accelerate expansion in Europe and the UK

Overview: It’s been an eventful week for Kiteworks, as the provider of data privacy and compliance solutions acquired German companies ownCloud and Draycoon as well as the UK’s Maytech. The former pair operate in the secure file sharing and collaboration space, with their addition fortifying data governance and control on Kiteworks’ platform. Similarly, Kiteworks can also enhance security features on the platform by integrating Maytech’s data file transfer solutions, cementing their position in the managed file transfer market. Read more here.

Kiteworks manages secure file sharing for over 35 million end users at almost 4,000 organiztions. Maytech focuses on secure file sharing, with robust API capabilities and ISO certification. ownCloud is an open-source application in the same space and Dracoon offers a very similar file encyrption and sharing service. Appears that Kiteworks will plan to move these customer bases over to their existing platform. Nice deal in terms of customer acquisition and geographic expansion, likely with some new tech features in addition.

New Segment - Podcast of the Week

We’ve added a new segment to our newsletter! Moving forward we’ll be sharing an interesting article, podcast or tweet from the previous week that is definitely worth knowing about. For this week’s edition, we’ve selected Brad Jacobs’ Think Big and Move Fast podcast where he discusses how to improve your investing with guest star Patrick O’Shaughnessy.

Be sure to check it out here.

Thanks for following along & hope you found something useful or interesting. We’ll be back next week with more deals.

All the best,

Nick

Nick Cellura

Principal, Climb Advisors