First Derivatives (FD), a software and consulting company, has bought Affinity Systems for CAD$14.5m (£7.7m) in a cash and share deal.
Affinity offers software solutions in the growing enterprise ‘big data’ analytical arena, which is one of the drivers for the acquisition, alongside a desire to enter new markets in finance, utilities and healthcare.
FD’s strategy is to penetrate additional vertical sectors using the capabilities of its Delta platform and kdb+ to capture and analyse large volumes of data, including streaming data.
Based in Ontario, Canada, Affinity employs 45 people and specialises in software development that addresses complex problems across a range of industries, combining third-party and proprietary software. It has a strong track record of project delivery, working with some of the largest and most prestigious organisations in Canada, including New Brunswick Power and London Hydro. In recent years Affinity has focused on big data opportunities around sensor data management and reporting. It also has a strong interest in the coming ‘internet of things’ market where devices, such as home heating systems, smart meters and so forth, can all be connected to the internet.
Affinity was appointed as a consulting, sales and training partner of Kx Systems, in which FD holds a 65% interest, in February 2014, strengthening the likelihood of a complete takeover.
The initial cost of the acquisition is CAD$7.0m (£3.7m), of which CAD$5.25m (£2.8m) is payable in cash and CAD$1.75m (£0.9m) through the issue of 78,190 FD new ordinary shares (the s0-called ‘Consideration Shares’.
Deferred consideration of up to CAD$7.5m (£4.0m) is to be satisfied in cash and/or new ordinary shares, payable on the achievement of agreed revenue targets over the period to 28 February 2018. Application has been made for the Consideration Shares to be admitted to trading on the AIM and the ESM stock markets. It is expected that admission will also take place on 7 April 2015.
In the year to 30 June 2014 Affinity reported revenue of CAN$4.3m (£2.3m) and CAN$0.3m (£0.2m) earnings before tax. Net assets at 30 June 2014 were CAN$1.8m (£1.0m).
Leslie Goldsmith and Hugh Hyndman are the Joint Managing Directors of Affinity and will remain in their current roles following the transaction.
Goldsmith commented: “Affinity differentiates itself on its deep domain knowledge and its ability to solve complex problems through the development of well-architected solutions. In recent years this has led us deeper into big data applications with low latency challenges. Through our relationship with Kx Systems, we have been able to create products that leverage the power of kdb+ to ingest and analyse vast quantities of data across a number of vertical sectors.”
According to the other MD, Hyndman: “With the resources of FD available to us, we expect to be able to accelerate our product development and bring it to market globally at an accelerated pace.”
Brian Conlon, CEO of FD, sees the deal a natural fit. “Both the strategy of developing software products built on kdb+, one of the world’s most powerful databases, and the cultural ethos of Affinity, mirror that of FD. While we have applied our domain knowledge within capital markets, Affinity brings the Company expertise across a number of new vertical sectors. We see this as an exciting opportunity for the Company to grow its revenues and diversify its customer base.”
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