Spirit Technology Solutions is set to enter the corporate and government market segment through the proposed acquisition of managed cyber security service provider Intalock for $15 million.
Based in Brisbane, Intalock offers advisory, technical and managed services, software licensing, in addition to running a security operations centre (SOC), for the financial services, healthcare, federal and state government, education, property and heavy industry verticals.
By acquiring Intalock, the internet and managed services provider formerly known as Spirit Telecom is set to further its FY21 growth plans with its entry into the corporate and government market space, as well as selling the cyber security service provider’s products under its existing portfolio.
“The Intalock acquisition brings a highly sophisticated cyber security offering. A number of esteemed cyber security leaders from Intalock will join Spirit, along with a blue chip customer base under the Spirit umbrella,” said Spirit managing director Sol Lukatsky.
“It propels Spirit into a new segment of the market and positions us as a credible contender for market share in the enterprise and government segment and enhances the cyber security offering for our existing customers.”
Under the acquisition, the Intalock brand is expected to remain standalone, with existing employees to retain their existing roles, with Sol adding that Spirit will invest to grow Intalock.
According to the terms of the deal, 85 per cent of the $15 million will be paid from cash reserves and its CBA debt facility cash. Meanwhile, the remaining 15 per cent will be paid out as equity at $0.38 cents per share, which will be escrowed for 12 months from the expected completion date of 3 December.
Additionally, an earn-out consideration component is available for out-performance in FY2022 capped to a maximum transaction value of $22.5 million.
“We couldn’t be prouder and more excited to join Sol and the Spirit team,” said Julian Haber, CEO of Intalock. “Their 2021 strategy for Spirit Technology Solutions is very unique and we can’t wait to help Spirit scale quickly as Spirit shareholders. We’re already working on a number of large corporate opportunities together.”
The transaction is roughly 6.5 times the cyber security provider’s earnings before interest, tax, depreciation and amortisation (EBITDA) for FY20 of $2.3 million, with its revenue reaching $23.6 million over the period.
This is the latest acquisition for Spirit, with it snapping up Beachhead Group, Altitude IT and Reliance IT back in August.
It also comes as the internet and managed services provider’s net profit absorbed a $1.5 million loss for the 2020 financial year, while revenue increased 100 per cent to $34.9 million.
Spirit’s revenue is still on the up, with its year to date unaudited results for financial year 2021 recording monthly revenue of $6.5 million in October, up 16 per cent month-on-month.
Its sales and total contract value as of November was at a recurring $6.9 million, up 166 per cent month-on-month and 565 per cent year-on-year, with pending installations at $2.8 million and IT services and technology sales at $12.1 million.