Proact has signed an agreement to acquire the German IT consultancy company sepago GmbH to enhance Proact’s market presence and expertise in delivering public cloud transformation and IT consultancy capabilities to the large and medium-sized enterprise segment. Through sepago’s over 85 employees, Proact strengthens its digital transformation services based on cloud-first technologies such as Microsoft Azure, Microsoft 365 and Citrix virtual desktops. sepago’s capabilities in IT security and transformation migration consultancy are additionally set to further boost Proact’s current offering.
Margin enhancing acquisition
As sepago is a consulting company it has a higher margin than Proact today, which to a larger extent is a re-seller. We estimate sepago’s EBITA margin to be around 13%, which would improve our 2023e EBITA margin from 6.6% to 6.9% all else equal, as well as increase share of sales coming from services to 47% (45%). This is well in line with the company’s strategy to increase its margin through higher share of service revenues.
Value accretive deal
The purchase price amounts to EUR 12 million in base price and an additional EUR 4 million earn-out, on a cash-free and debt-free basis, which corresponds to 5-6 times EBITA. The earn-out will be paid out over a period of 2.5 years subject to sepago reaching certain EBITA levels and operational KPIs. The transaction is expected to contribute to approximately EUR 15 million in increased annual revenues for Proact. Including sepago in our estimates would add 4% to 2023e sales and 7% to adj. EBITA all else equal, and the deal is done at a lower valuation than Proact is trading on currently (8.1x NTM EV/EBITA).
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