Converge Technology Solutions
(CTS-T) C$10.29
Highlights from Investor Meetings Event
Last week, we hosted investor meetings with CEO Shaun Maine and Interim CFO Matt Smith.
Impact: NEUTRAL
M&A focus is shifting to Europe. Based on management commentary from the Q4/F21 call, one more acquisition in North America is expected very soon following the announced deals for Interdynamix (details here) and CBI (details here) last week. Another four acquisition announcements are expected in Europe this quarter, including further expansion in Germany and a platform acquisition in the U.K.
In Germany, acquisitions are expected to help it expand into new states and verticals (beyond education/healthcare). Management indicated it had ~80 potential acquisition targets identified with ~15 shortlisted.
Highlighting management depth. One of the key challenges/risks with the story, in our view, is management's ability to successfully scale the business, as it looks to more than double the size of the business in the next 3-4 years. Mr. Maine indicated that the extensive experience of Chairman Thomas Volk (ex-CEO of Cancom) and recent hire, CRO John Teltsch, in particular, would be key in this regard.
Mr. Volk, Doris Albiez (Director, European Advisory Board), and Barbara Weitzel (REDNET's CEO) are helping Mr. Maine build up its European operations, with incoming CFO Richard Lecoutre to help when he joins later this year. President Greg Berard and John Teltsch are managing the North American operations with COO Cory Reid managing the back office/integration work.
Cross-selling is a key to driving organic growth. Management is focused on driving strong (double-digit) organic growth going forward. In addition to a continued strong IT demand environment, management indicated increased cross-selling success also played a key role in the pick up in organic growth in 2021, with cross- selling managed services a consistent characteristic among its top salespeople. Converge plans to focus on its top 120 clients this year to broaden its relationships with them (e.g., cross-sell managed services), which should help it generate solid organic growth, higher recurring revenue, and better margins.