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Scisys Plc (LON:SSY) is acquiring Germany-based ANNOVA Systems for an estimated deal value of £15.3m. ANNOVA is a leading supplier of software-based editorial solutions to the media sector. It has a track record of generating strong revenue growth and in 2015 won a landmark contract with the BBC, which underpins financial forecasts for 12 years. ANNOVA complements SCISYS’s dira! product offering for radio broadcasters, extends the group’s capabilities into television and creates cross-selling opportunities. The deal significantly boosts earnings, aided by cheap debt financing costs, and is value enhancing on our assumptions. Consequently, we believe the stock continues to look attractive on c 10x our FY17e earnings.
Acquisition of ANNOVA Systems
SCISYS is acquiring ANNOVA Systems from its management for an initial €11.35m along with an earnout arrangement for up to an additional €16.48m. Our understanding is that the reason ANNOVA’s management chose to sell was because the company had secured a landmark contract with the BBC and wanted to use this as a springboard for further expansion, but lacked the infrastructure to grow outside its core European markets. ANNOVA’s management will stay with the group for at least the three-year earnout period. ANNOVA’s flagship OpenMedia product complements SCISYS Media & Broadcast division’s dira! OpenMedia has a c 90% share of the German market, where dira! is also strong, and 40% of the French market, where dira! has minimal presence.
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