Serko is branching out into complementary businesses with the acquisition of a US business expense management software developer as it accelerates its North American expansion.
The travel management software maker will pay US$2.5 million in an all-scrip deal for Minneapolis-based InterplX. The purchase gives Serko a ready-made team on the ground in the world’s biggest economy, where the Kiwi company sees an opportunity to grab market share.
“The acquisition provides Serko with a North American customer service and technology development capability to support market expansion in the Northern Hemisphere, and augments Serko’s existing global support centres in providing a global 24/7 support footprint,” it said.
The timing of the deal means it isn’t expected to affect Serko’s expected earnings and revenue growth of 20-30 percent in the year ending March 31. It is seen adding $2.5-3.5 million to revenue the following year.
The acquisition will be paid entirely in shares, with half issued once the deal’s completed and the remainder subject to revenue targets being hit in calendar 2019. Serko will issue 573,922 shares, or 0.7 percent of its total stock, at $3.30 a piece in the first tranche. That’s a premium to Serko’s current trading price of $2.68.
InterplX founder Chuck Buckner and the existing management team will continue to run the business and report to Serko’s North America president Tony D’Astolfo.
“We were deeply impressed by the quality of the technology and the high service levels and customer retention that Chuck and the team have achieved, and we look forward to further building on InterplX’s strong pedigree in market,” Serko chief executive Darrin Grafton said in a statement.
The share issue falls within Serko’s ability to make placements, and the first tranche is subject to an escrow period restricting their sale before June 30.
Serko has been establishing a presence in the Northern Hemisphere with a successful trial of its Zeno platform by travel management company ATPI in the UK. That’s being extended to other corporate clients and will likely get rolled out to Europe and North America before the end of March.
Those reseller arrangements remove ongoing cost for Serko, which just needs to invest upfront to get its partner firm comfortable with the product.
It’s also been investigating acquisitions to accelerate its plans for global expansion. It had cash and equivalents totalling $19 million as at Sept. 30.