RE:Clarus target raise on acquisition close - cantechletter.com His numbers don't add up.
First of all, $20-25m in cost savings should add about 4%-5% to ebitda margins; I.e $20m/$520m =~ 3.84% , $25/$520 =~ 4.8%
Pro firma revenue is $520m for the combined companies.
According to the analyst, revenue for 2023 would be $451.7m and ebitda of $50.4m which is due to the fact that the acquisition didn't close at the start of the year. Ok that's fine.
2023 ebitda margins =~ 11.15%
2024 ebitda margins =~ 12.58%
If cost synergies are to be fully realized for the entire 12 month period in 2024, then ebitda margins should be at least 4% higher all else being equal. This could be partially explained if cost synergies take 1-2 years from the closing date to be fully realized. In this case, the $20-25m in ebitda would show up in fiscal 2025 instead.
In another report, DCM wishes to achieve 14% ebitda margins after cost synergies are achieved. This would be a sustainable long run ebitda margin for the combined business. The 12 month revenue run rate is ~ $520m.
14% of this number gives us $72.8m. If we remove $20-25m in cost savings from this figure then we could estimate the ebitda for the business on a ttm basis.
Ttm pro forms ebitda =~ $47.8 - $52.8m
If ebitda on a ttm basis is higher than this figure, then 14% ebitda margins should be easily attainable going forward with the additional cost savings in place.