Solwers grows in Sweden with a small acquisition

Translation: Original comment published in Finnish on 08/20/2024 at 7:06 am EEST

In the transaction, Solwers’ subsidiary WiseGate AB acquires a planning and control consulting company. In light of key figures, the acquired business appears to be of high quality and we believe it complements Solwers Group’s offering well.

Spectra Consult is a small consulting company from Sweden

Solwers announced on Monday that its subsidiary WiseGate AB has signed an agreement to acquire all shares in Spectra Consult AB. The acquired company operates in Skövde and Åmål in Sweden and has approximately 20 consultants. The company focuses on planning, design and control in the fields of electricity, telecommunications and security. Consequently, the clients operate largely in the fields of electrical power, military, infrastructure, and public civil buildings and we believe they are mainly in the public sector.

Founded in 2019, Spectra has grown to around 1.7 MEUR in its short history (revenue 2023). Last year, the company's EBIT was approximately 0.3 MEUR, which corresponds to an EBIT margin of 16.3%, and the profitability of the acquired business has been at a fairly good level, as is typical of an expert service business. Spectra is small in Solwers’ scale, as its revenue corresponds to approximately 3% of Solwers’ 2023 revenue and its EBIT corresponds to some 4% of Solwers’ operating profit adjusted for amortization of intangible assets (EBITA).

Growth step in line with the strategy is financed with cash and shares

Part of the acquisition will be financed through a directed share issue to Spectra’s sellers, who have committed to a one-year lock-up for the shares. In the share issue, approximately 62.5 thousand shares will be directed to the sellers at a subscription price of EUR 3.53, corresponding to 0.6% of Solwers’ share capital. The subscription price corresponds to the volume-weighted average price of Solwers Plc's share quotation for a one-month period before the acquisition.  The total purchase price of the acquisition was not disclosed, but historically Solwers has carried out acquisitions with a valuation multiple of approximately 5-6.5x EV/EBIT, in addition to which the transaction price mechanism has typically included some kind of conditional additional purchase price. Thus, we estimate that the basic purchase price consists of a cash payment of roughly 1.5 MEUR in addition to the shares, which the company’s financial position allows.

We believe that Solwers maintained a moderate valuation in the acquisition and, overall, consider the acquisition to be a move well in line with Solwers’ strategy. This provides conditions for successful capital allocation

The acquired company will be reported as part of the Solwers Group as of August 1, 2024, so we will include it in our forecasts when the company publishes its H1’24 report (August 30).