Just two months after its last acquisition software logistics business WiseTech Global Ltd (ASX: WTC) has moved to acquire ‘messaging solutions provider’ Xware for $12 million plus potential multi-year earn outs related to revenue growth and other general performance targets.
For a $7.3 billion business like WiseTech the acquisition is not material in itself and WiseTech recently raised over $300 million in cash from investors to fund its strategy of acquisitive growth to help it build a market-leading product that has competitive advantages around the world.
A lot of share market businesses attempt an aggressive acquisition strategy as part of their overall growth, but surprisingly few succeed over the long term and it’s only a year or two after the acquisitions have been completed that investors will see their success or not flow through to the group’s financials.
As such WiseTech remains a high risk / high reward bet given its strategy and valuation.
The stock is down 3% to $22.42 today but probably not in response to the acquisition news, as it commonly rises or falls by this kind of percentage depending on swinging investor sentiment over the outlook for the business and tech sector in general.
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Tom Richardson owns shares of AFTERPAY T FPO and Pro Medicus Ltd. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Pro Medicus Ltd. The Motley Fool Australia owns shares of AFTERPAY T FPO and WiseTech Global. The Motley Fool Australia has recommended Pro Medicus Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.