appScatter Group plc (LON: APPS), the intelligent app management platform, announced that it has signed an agreement to acquire 100 per cent. of the share capital of Abilott Limited for an initial consideration of £1.245 million, and a potential further consideration of up to £1 million dependent on the attainment of specified performance targets in the 12 months after completion.
CEO Philip Marcella caught up with DirectorsTalk to discuss the acquisition in more detail. Philip explains how the relationship came about, what the agreement means for company and clients, how it furthers the company’s strategy and what investors can expect to see within the next 12 months as a result of the relationship.
Established in 2007, Abilott provides digital security solutions, specialising in companies who are launching new products or seeking to become a gaming operator or expanding into new global territories. Customers include Gamesys, Paddy Power, Betfair, Virgin Games, Bodog.
Abilott helps both established organisations and emerging clients, providing security services for data and IT infrastructure with technologies such as Distributed Denial of Service, Penetration testing and Zero Day Vulnerability reporting. Abilott also provide consultancy services helping business reach compliance in a number of areas, such as GDPR, ISO27001, PCI-DSS or regulations from the UK gaming Commission.
Background to and reasons for the Acquisition
The acquisition of Abilott is in line with the Company’s strategy to develop its mobile app management platform and follows the acquisition of Priori Data GmbH in July 2018. The Company continues to assess further opportunities to accelerate the development of the platform.
Abilott has been working closely with appScatter for the last two years providing Security & Regulatory Compliance for the Group and supporting appScatter threat analysis products for appScatter customers. The Acquisition presents appScatter with an opportunity to increase its current security products offered whilst increasing margins to existing and planned customers for current products. In addition, Abilott will assist in the building of the automated GDPR compliance app tools into the appScatter platform. As a result of the Acquisition the enlarged group will not only be able to identify security issues in customers mobile applications but also to rectify the issues identified, thereby significantly increasing the revenue opportunities from each Enterprise customer.
For the year ending 30 September 2017, Abilott generated revenue of £1.5 million and a loss before tax of £170,998. Abilott had net liabilities at 30 September 2017 of £217,544.
Principle terms of the Acquisition and Consideration
The maximum consideration for the Acquisition is £2.245 million, comprising of £1.245 million in the initial consideration plus up to a further £1 million payable by the award of deferred consideration shares. appScatter is acquiring Abilott on the basis that it holds net liabilities as at 17 December 2018 of £100,000.
The Initial Consideration for the Acquisition is £1.245 million, comprising £500,000 in cash, £245,000 in Director Loans and £500,000 by way of the issue of 1,666,666 new ordinary shares in the Company at an effective issue price of 30 pence per ordinary share. The Cash Consideration will be satisfied from existing cash resources, of which £200,000 is payable immediately and the further £300,000 is payable within 150 days of the completion of the transaction.
Application will be made for the Initial Consideration Shares, which will rank pari passu with the Company’s existing Ordinary Shares, to be admitted to trading on AIM. Dealings in the new Ordinary Shares are expected to commence at 8.00 a.m. on 21 December 2018.
The Acquisition has been structured with a significant contingent consideration element, linked to challenging performance targets for Abilott, thereby allowing both parties to share the benefits of efficiencies and growth. The Deferred Consideration Shares are dependent on Abilott achieving revenue criteria in connection with sales to certain customers for the year ending 31 December 2019 and would not be issued until January 2020.
The number of Deferred Consideration Shares, which will be issued fully paid, will depend inter alia on the performance of Abilott in the relevant period and the prevailing shares price. The maximum number of Deferred Consideration Shares is 3,333,333.
Philip Marcella, appScatter group plc CEO, commented:
“The acquisition of Abilott is a strategic milestone for appScatter, enabling us to bring our security services that we previously outsourced in house, significantly improving our margin. Having worked with the Abilott for some time, we are already aware of the benefits the Acquisition brings to our growing product base and the services we can provide to our customers.
“We look forward to welcoming the Abilott team to the appScatter group. The Acquisition, combined with the acquisition of Priori that we completed earlier this year, significantly boosts the overall appScatter offering.”
Total Voting Rights
On Admission of the Initial Consideration Shares, the Company will have 91,016,157 ordinary shares of 5 pence each in issue. No ordinary shares are held in treasury. The figure of 91,016,157 may be used by the Company’s shareholders as the denominator in the calculations by which they will determine if they are required to notify their interest in, or a change to their interest in, the Company under the Financial Conduct Authority’s Disclosure Guidance and Transparency Rules.