ReadyTech (ASX:RDY) share price jumps on new acquisition

The deal comes approximately 6 months after ReadyTech finalised its previous acquisition.

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The ReadyTech Holdings Ltd (ASX: RDY) share price is on the move on Monday. This follows the announcement of an acquisition by the ASX-listed software company.

In early trade, shares are trading 3.24% higher to $3.50 apiece.

What’s happening with the ReadyTech share price today?

This morning the ReadyTech share price has gained momentum after its latest announcement to the market.

According to the release, the company has expanded its footprint with another strategic acquisition. In a $2.2 million deal, ReadyTech has acquired specialist enterprise student management software business, Avaxa. This deal comes approximately 6 months after ReadyTech finalised its previous acquisition.

Avaxa supports many of Australia’s leading enterprises, TAFE, and higher education institutions. Importantly, Chisolm Institute and Melbourne Polytechnic use the Avaxa software to manage the student journey from enquiry to graduation. This includes everything from course lifecycles and timetables to finance and compliance.

Shareholders will be hoping that the Avaxa offering with its key customer integrations will benefit the ReadyTech share price.

In terms of payment for the acquisition, ReadyTech will make an upfront payment of $0.7 million. From there, a maximum of $1.5 million will be in deferred consideration, consistent with a recurring revenue multiple of 2.2 times.

ReadyTech will pay out the total consideration of $2.2 million from the company’s cash reserves within the next 12 months.

Moreover, the integration of Avaxa is expected to deliver incremental recurring revenue in FY21 of $670,000. This will be a partial addition, beginning from October 2021. Meanwhile, earnings before interest, tax, depreciation, and amortisation (EBITDA) margins will be 15%.

Management commentary

Today’s announcement marks another milestone after the company hit a new 52-week high last week. Commenting on the latest acquisition, ReadyTech CEO Marc Washbourne stated:

Avaxa have built deep domain and specialist expertise and exhibit strong TAFE and enterprise capability, as well as client engagement, through their existing relationship with six of Australia’s leading TAFE institutions that are supported by Avaxa’s Strata software.

The acquisition is highly complementary to our education business and will allow us to leverage Avaxa’s relevant customer base and reputation in the TAFE sector to position ReadyTech as a key technology partner for enterprise education institutions.

Although ReadyTech is a small-cap company, its performance has been anything but tiny over the past year. In fact, the ReadyTech share price has far exceeded the S&P/ASX 200 Index (ASX: XJO) with a return of 78% over the past 12 months.

Since reporting its FY21 result, the ReadyTech’s shares have climbed 19% in value.

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Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Readytech Holdings Ltd. The Motley Fool Australia has recommended Readytech Holdings Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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