LoopUp hopes to enjoy network effect boost with £61m acquisition
Remote meetings platform provider LoopUp (LOOP:AIM) has laid out rampant growth ambitions with a potentially transformational acquisition.
The company has struck a deal to buy private equity-backed peer MeetingZone for £61.4m cash.
The acquisition, if approved by shareholders in a vote on 1 June, will more than double Loop-Up’s annual revenues to greater than £40m as well as accelerate organic growth down the line.
It believes the acquisition will give it greater buying power with suppliers and enhance the network effect of the LoopUp product.
The latter is a phenomenon where increased numbers of people using a service will improve its value to them and to the network owner.
For example, the network effect is clearly evident with taxi service Uber, auction site Ebay and property portal Rightmove (RMV) all thriving as more people use their services.
LoopUp plans to raise £50m of equity funding from investors to help pay for the deal, with the new shares to be issued at 400p.
This is clever leveraging of the company’s premium rated stock on the back of a very strong stock market performance during the past eight months.
Support for the acquisition from investors has been very strong. In the handful of days since the deal was announced on 16 May the LoopUp share price has rallied 14% to 490p.
LoopUp’s patented and cloud-based remote meetings software is designed to drag audio conferencing into the 21st Century.
This is a competitive space stalked by deep pocketed rivals, such as Microsoft’s Skype for Business, Google Hangouts, Cisco’s WebEx, Adobe, AT&T plus more recent start-ups such as GoToMeeting, JoinMe and the UK’s Powwownow.
LoopUp’s key advantage is a streamlined service for both hosts and participants that not only works well but is intuitive and easy to use.
The company has an enterprise focus with over 2,000 customers, including money transfer business Travelex and drinks maker AG Barr (BAG).
LoopUp joined AIM on 24 August 2016, raising gross proceeds of £8.5m at 100p per share. This growth funding was earmarked for product upgrades and building a new online sales channel. The company was worth around £40m at the time of listing and is now valued at £206m.
Full year results for 2017 showed revenue up 29% to £17.5m and earnings before interest, tax, depreciation and amortisation (EBITDA) up 161% to £3.5m. These figures exclude a discontinued BT technology licensing business.