LONDON: Software Circle plc (AIM: SFT) announced today the acquisition of the entire issued share capital of Total Drive Software Limited, an end-to-end software solution provider for driving instructors.
The acquisition is valued at up to £7.5 million, to be satisfied in cash on a debt-free and cash-free basis. The deal is projected to be cash flow generative and earnings enhancing within the first year post-acquisition.
The initial consideration paid at completion was £3.5 million, with deferred consideration of £1.0 million due on the first anniversary of completion. Additionally, up to £3.0 million is payable contingent upon the achievement of specific financial targets by Total Drive, known as the “Earn-out.”
Total Drive, established in 2020, has demonstrated strong growth attributed to its comprehensive software solution and mobile app. Currently, it is the UK’s leading driving instructor app, used by approximately 6,000 individual instructors weekly, garnering high customer ratings (Trustpilot 4.5/5, Capterra 5/5). About 80% of its revenues are derived from annual recurring subscription fees, with the rest from payment processing and training aids and materials.
Founder and CEO Ross Kernick will provide consultancy for two years post-completion, with CTO Tom Wotton taking on the day-to-day operational lead.
For the year ended September 30, 2024, Total Drive’s unaudited financial statements reported revenue of £0.8 million, EBIT of £0.4 million, and closing net assets of £0.02 million. Current run-rate revenues are approximately £1.1 million, with expected EBIT of around £0.7 million after adjustments.
The initial £3.5 million consideration was funded from existing Software Circle cash reserves. The deferred consideration and potential Earn-out payments will also be satisfied in cash. The Earn-out is dependent on Total Drive achieving certain annual recurring revenue and payment processing revenue targets for 2026, adjusted for any shortfall in earnings targets for 2025 and 2026.
Gavin Cockerill, CEO of Software Circle, expressed enthusiasm about the acquisition, stating, “We are thrilled to welcome Total Drive to Software Circle. Total Drive has built a market-leading product with a strong customer base, and we see significant potential to further accelerate its growth by leveraging our expertise in operational scalability, technology, and customer engagement. We look forward to working with Ross, Tom, and the team to enhance Total Drive’s market position.”
Ross Kernick commented, “Tom and I were highly impressed with Software Circle’s operating model. We believe the quality of their systems and processes will play a crucial role in supporting our rapid growth, enhancing our award-winning software, and elevating our customer service. This partnership will further solidify Total Drive’s position as the UK’s #1 Driving Instructor software.”
Looking ahead, Software Circle is poised to finance its pipeline of opportunities with established debt facilities and equity raised in September 2023. The Group remains focused on its strategy of identifying and acquiring businesses that align with its criteria, aiming for sustainable growth and enhanced value proposition.