Kontrol Technologies Corp., a Canadian public company and specialist in smart buildings and cities deployment via IoT, cloud and SaaS technology, announced it has entered into a purchase agreement to acquire all of the issued and outstanding shares of a leading building solutions company (i.e. the "Acquisition Company"). The Acquisition Company provides integrated installations of complex heating, cooling, ventilation and building automation systems.
Acquisition Company highlights, per Kontrol, include:
- Audited revenues of $43 million for fiscal year 2020
- Contracted order book of approximately $120 million for next 3 years
- Annual Revenue Growth Rate in excess of 20% over the last 5 years
- More than 20 years of operating history with established customer base
- Synergies with Kontrol's existing operating platform
- Audited net income before tax of $128,000 for fiscal year 2020
- History of positive Adjusted EBITDA from operations
"This acquisition represents another significant milestone in the execution of our plans to further scale our business," said Paul Ghezzi, CEO of Kontrol. "In addition to an impressive order book, there are numerous synergies that the Acquisition Company provides in terms of scale and growth. Given our adequate current cash on hand needed to close the transaction, we hope to complete the acquisition in the near term and integrate the Acquisition Company into our operating platform."
Kontrol provides a combination of software, hardware, and service solutions to its customers to improve energy management, air quality and continuous emission monitoring.
The Acquisition Company has traditionally focused on larger projects with one-time project revenues and a small percentage of its overall business with recurring revenue. Following the completion of the acquisition, Kontrol will seek to grow recurring revenues through vertical integration with its current building energy management software and ongoing service agreements.
"We have identified potential opportunities to grow the Acquisition Company's EBITDA margins by changing its revenue mix through the addition of recurring revenues over time," continued Ghezzi. "This serves as a prime example of our target acquisition profile and we look forward to realizing the strong synergies resulting from the transaction, ultimately to generate sustainable value for our shareholders."
The Acquisition Company is a family-owned private enterprise, and its key management team will remain in place under agreement for a period of up to 3 years. Existing management will be incentivized to execute and perform on their growing contract order book through an earn-out of over 3 years.
Pursuant to the agreement, Kontrol will acquire all of the outstanding shares of the Acquisition Company for the consideration of $6.75 Million and additional contingent performance-based consideration. The purchase price will be settled by: (i) $3,250,000 in cash on the closing date, subject to customary post closing adjustments and reconciliations; (ii) $3,500,000 Vendor Take Back at 3% annual interest rate with bullet repayment at the end of 3 years from the closing date (iii) a vendor performance payment equal to 45% of adjusted 3 years cumulative earnings after-tax in excess of $4.5 million.
Closing of the transaction is subject to customary closing conditions and NEO approval and is expected to occur in August 2021. Learn more at www.kontrolcorp.com.