Instem PLC (LON:INS), the life sciences data specialist, is to acquire software group The Edge for up to £8.5mln.
The acquisition is expected to be earnings enhancing in 2021, Instem said, adding that it will also broaden its presence in the discovery study management market.
The Edge’s expertise is to make sure data from experiments is efficiently captured, stored and shared between scientists and technicians helping to reduce the time required to market a drug.
In the year ended 31 July 2020, The Edge reported unaudited, normalised profits before tax of £1.7mln on sales of £2.7mln, of which £0.8mln was recurring revenue.
Sales in the past full year benefitted from high levels of professional services revenue, expected to be replaced by significant future growth in recurring software revenue.
The initial consideration is being satisfied by £4mln in cash and £2mln in shares, with the vendors staying with the company and agreeing to a 24-month lock-in period for the shares element.
AIM-listed Instem said the acquisition was part of a broader growth strategy that will see it become a consolidator of software and technology businesses in the pharmaceutical and life sciences market.
Phil Reason, Instem's chief executive, said: "We are delighted to have continued our acquisition strategy with such a strong addition to our portfolio.
"The Edge has an excellent reputation with its clients and we believe their suite of products, and scientific and technology know-how will further enhance our industry reach and standing.
"We are particularly pleased to extend our coverage in Bioanalytical / Drug Metabolism & Pharmacokinetics, both of which are hugely important across other phases of R&D that Instem targets.
"Additionally, we continue to evaluate a number of potential acquisition opportunities and are well placed to build on this very exciting addition in due course."
Shares rose 4% to 533p.