Netcompany: An acquisition with potential, but also a shift in Netcompany’s strategy - Nordea

On 8 November, Netcompany announced the acquisition of Luxembourg-based Intrasoft International, which will strengthen Netcompany’s position within the EU and also give a broader European foothold. While still early days, the acquisition boosts potential to tap into the significant digitalisation investments planned by the EU and its member states, where Intrasoft’s various platforms are expected to play an important role. But we also see the acquisition as a shift in Netcompany’s strategy, as Intrasoft will be operated as independent and with limited integration. The reasons for this are likely many, but the size of Intrasoft (2,800+ employees) alone would make integration difficult. Netcompany should know Intrasoft well given its cooperation in the past and, not least, following the significant win in 2020 when the two companies in combination won the development contract for delivering a platform to hand le customs declarations when importing and exporting goods to/from Denmark. One key question left due to lack of financial disclosure is the reasons behind the lower profitability and not least the growth potential. Intrasoft has rapidly grown its order backlog (H1 2021: ~3.5x 2020 revenue), albeit the timing of the backlog was left close to unanswered, which makes it difficult to gauge the growth potential, but we note that the value of backlog increased by EUR ~200m in H1 2021 compared to end 2020, which is close to same level as the 2020 revenue. Netcompany is to pay EUR 235m (of which EUR 15m is in existing shares), equal to 2020 EV/EBITDA of 13x, which appears to be a less demanding valuation, not least when taking the future prospects into account. Still, given the size of Intrasoft, Netcompany’s reported numbers will likely be diluted in the next few years and will be less impressive than what we have been used to.