Sangoma Technologies Corp T.STC

some interesting comments on acquisition

[mingzhu]

"Acquisitions:

Purchased Star2Star in January 2021 for a whopping $437M. At the time it was announced that the combination of the two companies would generate $250M in revenue. Star2star was producing $19M annually in adjusted EBITDA at the time, so Sangoma paid a multiple of 23 year payback period. FOR ADJUSTED EBITDA. This was a horribly overpriced deal, further solidified by taking a $91M impairment last year, and also occurred at a time when many microcaps were making equally poor transactions.

In March of last year they acquired Netfortis. They paid $80M in this deal which was to generate $50M in annual revenue and since no profitability metrics were provided in the deal, I will have to assume they were not. Given the intangibles and goodwill included in the transaction it appears they overpaid here as well, but not nearly as much as the bend over job they took on Star2Star. Based on their news releases at the time, they should be delivering $300M in annual revenue, but they are not on the pace to do so through six months."

[Torontojay]

You were too generous on its ebitda purchase price multiple.  The company, S2S, was acquired for $US 437 m and it generated only $US 14.7 m in ebitda. That's a payback of approximately 30 years!!! Let's also remind ourselves that ebitda is no substitute for free cash flow which could take the multiple to 35+ on a free cash flow basis.   

[Stonksonlyup90]

Regardless of prior acquisition prices, the company is now trading at a roughly 11% Free Cash Flow multiple... the stock price has fallen drastically, and arguably it should have given acquisition prices, but this is certainly an attractive entry price at the moment! Company needs to realize synergies from these acquisitions and will be forced to do so given current market conditions.

[Tan4646]

Thx, very interesting,. Can you provide the source of that observation. Thx

[Tan4646]

Never mind, got it. I remember now.