Cipherpoint Ltd (ASX:CPT) has entered into a binding but conditional agreement to acquire all of the issued capital and business of Sydney-based cyber services company Excite IT Pty Ltd.
Excite IT is a leading provider of managed IT and security services, cloud solutions and automation technologies.
This proposed acquisition will extend Cipherpoint’s capabilities to be able to offer a range of managed security, IT and cloud solutions.
Subject to completion, Excite IT founder Bryan Saba will join Cipherpoints’s leadership team as managing director and CEO and will remain CEO of Excite IT.
“Cross-sell unique capabilities”
Cipherpoint chairman Ted Pretty said: “This acquisition continues CPT’s momentum as a cyber and cloud services business.
“We are delighted that Bryan will lead our efforts to grow that business.
“It is our intention to actively cross-sell the unique capabilities of both Excite IT, Brace168 and VITCS.
“CPT will support Excite IT as it continues to focus on growth in FY23.”
About Excite IT
Founded by Bryan Saba, Excite IT optimises information technology platforms and processes for its enterprise customers and implements appropriate cyber security solutions to protect their businesses and the information of their customers.
The company’s customers include market leaders in the property, logistics, biscuit and snack food industries.
Notably, Excite IT achieved revenues in excess of $3 million in FY2022.
Excite IT founder Bryan Saba said: “I am delighted that Excite IT will be joining the Cipherpoint teams.
“We have had a strategic relationship with Cipherpoint subsidiary Brace168 for some time.
“I am particularly pleased we will be extending this capability to deliver a broader range of cyber services to our clients.”
Purchase consideration
The acquisition price will be structured as a combination of cash and scrip and is up to $3.25 million in aggregate consisting of upfront, deferred and performance-based earn-out elements.
At completion, Excite IT shareholders will receive (in their respective shareholding proportions) $1.25 million cash consideration (less any required balance sheet adjustments) and $1 million in CPT shares issued at $0.01 per share (100 million ordinary shares), which shall be voluntarily escrowed for six months following their issue.
Further, Excite IT’s shareholders will receive (in their respective shareholding proportions) $500,000 on the date which is 12 months from the completion of the acquisition.
If for the 12 months ending June 30, 2023, the EBITDA for the Excite IT business on a standalone basis is no less than A$800,000, then Excite IT’s shareholders will receive (in their respective shareholding proportions) a further $500,000 in CPT shares issued at $0.01 per share (50 million shares).
Conditions precedent
The acquisition is subject to various conditions precedent including:
- completion of due diligence;
- raising sufficient funds for the upfront cash consideration of the transaction;
- successfully obtained all necessary shareholder and ASX approvals for the proposed transaction; and
- CPT offering and Bryan Saba accepting a market-based service agreement.