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magazineIdeagen makes smart US move with Medforce deal
Red tape and compliance software supplier Ideagen (IDEA:AIM) has made its first acquisition in the US. We believe this is a significant stepping stone that could realise substantial value for the company and shareholders.
New York-based Medforce provides productivity and legal compliance solutions that help streamline processes for healthcare organisations and prepare them for auditing.
Healthcare is one of the most highly regulated industries in the world. Ideagen is paying $8.7m for Medforce, or about £6.1m at current exchange rates.
There are several things to like about the purchase. First, it gives Ideagen a firm base across the pond. About half of new business currently being won by the company is in the US. Medforce is also profitable, chalking-up about £0.7m of earnings before interest, tax, depreciation and amortisation (EBITDA) on rough £3.4m revenue in 2017.
A high proportion of those revenues are recurring in nature, 82% according to Ideagen.
Paid out of cash and debt facilities, that means no new shares are being issued so there is zero dilution to existing Ideagen shareholders.
While analysts raised forecasts for the full year to 30 April 2019 to £11.4m of pre-tax profit on £42.8m revenue, we believe there is scope to outstrip those estimates.
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