Comverse comes off the divestiture of its BSS division to make its largest – and only significant – acquisition in nine years. The mobile service systems vendor is paying $135m in cash, $75m in stock and a $35m earnout to acquire Acision. The deal carries an enterprise value of $367m – Comverse will take on $157m in Acision debt – and values the target at 1.9x trailing revenue.
The multiple is well below the median for software M&A, as Acision has struggled to diversify its business beyond SMS messaging. Comverse hasn’t been immune to those struggles. In fact, its business commands just 0.7x trailing revenue on the public markets. Comverse’s management anticipates that this deal will enable it to return to growth by 2017.
As mobile operators’ revenue from traditional voice, voicemail and SMS continues to decline, both Comverse and Acision have been pursuing strategies based on diversifying their own businesses to address the operators’ changing requirements. Acision has improved its competitiveness in mobile messaging while also steadily expanding into new areas such as white-label OTT apps and enterprise messaging. The fit with Comverse, which remains a leader in voicemail but is also expanding in digital services, should be good. Though there may be overlap in some operator accounts, the combined entity will be a strong and credible player in delivering a broad suite of communications and digital service products to operators in all major regions.
We’ll have a full report on this transaction in tomorrow’s 451 Market Insight.
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