The Tesserent Ltd (ASX: TNT) share price soared today as the company announced yet another acquisition. By the close of trade, the Tesserent share price was up 8% to 27 cents on the news. It is the second acquisition the company has announced in three days.
Tesserent provides enterprise-grade cyber security and networking solutions targeted at the mid market. Its customer base spans Australia, the United Kingdom and Korea. The company’s flagship offering is its ‘Cyber 360’ strategy which includes solutions such as identification, protection and 24/7 monitoring to combat the growing risk of cyber security threats.
Ludus Cyber Security acquisition
This morning, Tesserent announced the acquisition of Ludus Cyber Security with the signing of a share purchase agreement executed between both parties.
Ludus, headed by cyber security expert, George Stewart, will be absorbed by Tesserent’s North Security. This will further enhance the company’s strong government offering, backed by the federal government’s recently announced $1.67 billion bill.
This acquisition rounds out Tesserent’s standing as the largest cyber security services provider in the Canberra market with over 180 locally based cyber security specialists. It also follows the previous acquisitions of Seer Security, North Security and Pure Security, all of which service Australian Government departments and agencies.
Geoff Lord, Tesserent Chairman, commented: “Ludus, whilst modest in size, has a solid operating record and is immediately earnings and cash flow accretive to the Group. Ludus achieved in excess of $1.2M revenue and $350K in sustainable earnings in FY20, with strong revenue and earnings forecast for FY21.”
On Wednesday, the Aussie cyber security provider also announced an acquisition that pushed the Tesserent share price 9% higher. Airloom kicked off phase two of Tesserent’s acquisition program.
Airloom is a Sydney-based cyber security firm with a focus on security architecture and supporting organisations’ journeys to the cloud. The firm has a strong management team and an excellent operating record, with FY20 gross revenue in excess of $27 million. Airloom is immediately earnings and cash flow accretive to the Tesserent group, having achieved in excess of $2.7 million earnings before interest, taxes, depreciation and amortisation (EBITDA) in FY20. Strong revenue and earnings are expected to continue into FY21. The firm’s financial position is underpinned by multiple locked-in, recurring annuity-based contracts.
The acquisition is fully funded through Tesserent’s debt funding facility with Pure Asset Management announced earlier in the year. The consideration for the acquisition of Airloom is a mix of cash and Tesserent shares, being $6 million cash and 40 million shares.
What now for the Tesserent share price?
Post completion of the acquisitions, Tesserent now has a strong earnings base and is targeting a revenue run rate of $80 million. The Tesserent share price has been on a tear this year gaining a huge 575%. It is currently trading at 27 cents.
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Motley Fool contributor Daniel Ewing owns shares of Tesserent Limited. The Motley Fool Australia has no position in any of the stocks mentioned. 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.
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