LONDON, UK: Grafenia plc (AIM: GRA) has agreed to acquire the entire issued share capital of Vertical Plus Limited, an ecommerce software business, based in Plymouth, on a debt free/cash free basis.
The total consideration of up to £2.88 million will be satisfied in cash. The acquisition is expected to be cash flow generative and earnings enhancing in the first year after acquisition.
The initial consideration comprises cash of £1.25 million to be paid on completion, together with a deferred consideration of £1.00 million to be paid on the first anniversary of completion. Up to a further £0.63 million is payable over three years, contingent upon the achievement of certain targets relating to the future financial performance of Vertical Plus.
Completion of the acquisition is conditional on (i) the completion of short form sale and purchase agreements by minority shareholders of Vertical Plus; and (ii) funds being raised by Grafenia via the bond facility put in place in 2020.
Grafenia plc is seeking to raise £4.25mn via an issue of bonds, £1.25mn of which will be used for the initial consideration due on the acquisition of Vertical Plus Limited, with the balance being used to finance the acquisition of other potential acquisitions currently in the pipeline, which have a combined turnover of c.£4.0mn, adjusted EBIT of c.£1.3mn and valuations typically between 4 and 5 times adjusted EBIT.
Vertical Plus provides a range of growth-focused ecommerce solutions sold to customers on a fully managed basis. The software platform enables and simplifies the implementation of large inventory ecommerce.
The business was founded in 2001 and operated by David Gadd (current CEO) and Nicola Bonning (current MD). Nicola will step down on completion of the acquisition whilst David Gadd will remain in a part time consultancy basis for 12 months. Vertical Plus currently has 25 employees.
The unaudited financial statements for Vertical Plus for the year ended 31 March 2022 reported revenue of £2.01m, EBIT of £0.25m, and closing net assets of £1.29m.
Gavin Cockerill, Acting CEO of Grafenia said: “We’re delighted to have Vertical Plus join Grafenia. It’s culturally and strategically aligned. The ecommerce solution we provide our Nettl partners can be enhanced with the solutions Vertical Plus provides. We’re excited about the growth potential our route to market could help bring. This is another step toward growing our software nucleus.”
David Gadd, joint founder of Vertical Plus said: “We see Grafenia as the right owners for our software business. It’s a natural, organic fit. Working with the Nettl network gives Vertical Plus the potential of nationwide reach. This further increases revenue growth for Vertical Plus, while also enhancing the offering for our current clients.”