South Africa-founded global specialist software and services group Adapt IT Holdings is actively seeking high quality vertical market software businesses to acquire in Europe and Africa, CEO Tiffany Dunsdon told Mergermarket.
The technology firm was acquired by Mississauga, Canada headquartered Volaris Group in 2022 for ZAR 616m (USD 32.2m). Volaris Group is a subsidiary of Canadian software company Constellation Software [TSE:CSU].
Adapt IT, which operates as a standalone business within the Volaris Group, has a strong appetite to expand its operations and offerings across Europe and Africa via M&A, Dunsdon said.
The company is involved in live talks, at various stages with multiple targets, and is looking for more, Dunsdon said. Talks are progressing steadily, and Adapt IT hopes to deploy some capital on M&A before year end and expects more deals to follow next year and beyond, she said.
Acquisitive growth continues to be a fundamental strategy and core to Adapt IT's DNA following Volaris’ takeover, Dunsdon said.
“We wanted to continue, but this time it comes with the benefit of the global best practices and the depth of resources,” she said, adding that Adapt IT would want to replicate Volaris’ buy-and-hold model.
The Johannesburg headquartered enterprise, which is servicing more than 10,000 customers in 55 countries globally, wants to buy software businesses which specialise in a particular niche without geographical restrictions both in Europe and Africa, the CEO said.
The company targets the bigger markets in Africa like South Africa, Kenya, Nigeria and Egypt as well as the Middle East, she said, adding that there is no limit to the geographic or vertical niche that firm could consider.
It is more concerned about the targets’ quality, software niches, specialization and strength than their domain, she said.
The company, which is currently headhunting a senior M&A executive experienced in executing transactions, relies on its CEO-led in-house corporate development team to handle the entire M&A processes, including scouting would-be targets, Dunsdon said.
However, its management welcomes approaches by interested targets, pitches from owners or their sell-side advisors, and third parties with target suggestions, she said.
Adapt IT, which delisted from the Johannesburg Stock Exchange in 2022, is pursuing acquisitive growth autonomously and wants to "acquire and accumulate" large and mature software solutions providers where at least USD 100m can be a ballpark figure for a deal or target value, Dunsdon said.
Targets can be well-established revenue generative founder run businesses which have reached maturity and are very strong in their virtual markets, Dunsdon said. They may also be held by financial investors and corporates, or could be carve-outs from corporates, she said.
Fitting targets must have grown far beyond PE/VC led fundraising rounds, the CEO said. They must have reached a point of looking at their next growth phase and platform to grow into a “bigger corporate” and looking for a permanent home with international reach and best practices, she said.
The targets must have some synergies and be complementary to Adapt IT’s existing verticals, have capacity to either give it a strategic entry into additional new markets or strengthen its existing capabilities, the CEO said.
Funding options will be considered case by case once a specific target is identified and negotiations take form, the CEO said. To finance acquisitions, Adapt IT will rely on its positive net cash position and balance sheet and backing from its shareholder, and it also has access to debt facilities, she said.
As its strategy is to “buy and hold forever” it prefers taking over its target rather than “engaging in minority or majority stakes” to ensure alignment of strategy and focus, she said.
The company would only consider partial acquisitions in very large transactions and in exceptional situations where there is a high possibility for it to increase its holding, Dunsdon said.
Adapt IT, founded in 1996, develops custom-built applications for its clients, primarily medium to large organizations, and offers technical consulting and support in the information technology sector, according to its website.
by Ntando Ncube in Johannesburg
Source: Mergermarket
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