Experian (LSE:EXPN)’s takeover of Illion could pave the way for further merger and acquisition activity and should add value in as few as three years, analysts have said.
The credit rating specialist announced the AU$820 million (£427.2 million) purchase of the Australian and New Zealand-based consumer and commercial credit bureau on Thursday.
“[This] transaction greatly expands Experian (LSE:EXPN)'s presence in an existing market and adds further geographic diversification,” Jefferies analysts noted in response.
“Illion will likely act as a platform for the introduction of Experian's broader capabilities.”
According to the bank, benefits from the takeover will feed through in three and five years as initial costs are overcome.
Illion’s expected 31% margin by 2026 is in line with Experian’s wider business-to-business average, analysts said, with the business expected to contribute AU$65 million pre-tax earnings over the next year.
This will have to stretch to AU$100 million, driven by revenue growth, in order to cover takeover costs, Jefferies noted.
“In our view, Experian has capacity for further merger and acquisition [activity],” analysts added, noting the FTSE 100 could deploy US$2.8 billion to US$4 billion over the coming year, translating to a 4% to 6% jump in per-share earnings.
Jefferis reiterated a ‘buy’ rating for Experian, alongside a 4,020p share price target, which suggests an 18% upside on Thursday’s closing price.