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By Josh White
Date: Thursday 13 May 2021
LONDON (ShareCast) - (Sharecast News) - NCC Group has agreed to acquire the intellectual property management (IPM) business of Iron Mountain, it announced on Thursday, for $220m (£156m) cash.
The FTSE 250 company said the business being acquired comprised "substantially all" of the assets of Iron Mountain Intellectual Property Management, together with certain other assets of affiliates of Iron Mountain exclusively related to the IPM business.
It said the proposed transaction was expected to provide the enlarged group with a number of financial benefits, being "significantly accretive" to earnings per share from completion, even before factoring in revenue synergies.
The acquisition would also be immediately accretive to group EBITDA margins, the board claimed, adding that the group would have an enlarged recurring revenue base, with 80% of IPM revenues being recurring, compared to 60% of NCC's software resilience division's revenues.
NCC said the acquisition would strengthen the group's cash generation owing to IPM's cash conversion ratio of over 90% for the last three years which, following cash interest and tax deductions, should provide a "rapid de-leveraging profile" and enable further organic and inorganic investment in the near term.
Material tax savings were also expected, which the directors believed would be created over a 15-year period as a result of intangible assets created by the acquisition that could be amortised for tax purposes.
The acquisition would also provide "material additional scale" to the group, as the IPM business reported revenue of $32.9m and EBITDA of $21.6m for the 12 months ended 31 December.
Looking at its current trading, NCC's directors reaffirmed that the group's pre-IFRS 16 adjusted EBIT for the year ending 31 May would be at least the market consensus of £33m.
"This acquisition will transform NCC Group's software resilience business, making it a market leader, and deliver immediate financial and operational benefits to the whole of the group," said chief executive officer Adam Palser.
"The IPM business shares many similarities with our own software resilience business, including a commitment to providing exemplary service for clients."
Palser said there were "tremendous opportunities" to grow the combined business by offering IPM's blue-chip clients the choice of new services and support.
"Following completion, NCC Group will be a stronger and broader business with an even greater ability to support clients in the ceaseless struggle against cyber-crime in all its forms."
At 0817 BST, shares in NCC Group were up 3.74% at 263.5p.
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