Akka Acquires Data Respons and Makes its Most Expensive Acquisition Ever
In a November blog, we had mentioned that Akka had issued €175m in convertible bonds. Akka acted fast and announced this morning its most expensive acquisition to date, that of Data Respons, a vendor headquartered in Oslo, Norway, for EUR 366m.
Akka’s rationale for the deal that Data Respons brings digital (e.g., analytics, IoT, security), application services, embedded systems, and connectivity services capabilities that are precious for ER&D service vendors.
Data Respons had in Q1-Q3 2019 revenues of NOK 1,345m (EUR 135m), up by 13% organically during the period, and an EBIT margin of 9.9%. The company, although headquartered in Norway, derives its highest share of revenues from Sweden (42% of revenues). Germany is its second-largest geography (28% of revenues).
Akka estimates that with Data Respons, it now has EUR 2bn in proforma revenues. Of these EUR 2bn revenues, the company reckons EUR 500m is in digital and application services, EUR 700m in embedded systems, and the remaining EUR 800m in mechanical engineering and industrial IT.
Akka highly values the skills brought by the 1,400 employees of Data Respons and will be paying EUR 366m, a 20% premium over Data Respons’ latest share price. The company has secured ~43% of the shares of Data Respons and targets 90% of all shares, showing its confidence in the attractiveness of its offer.
Data Respons opens up new territory for Akka, which had no presence in Norway. Yet, Data Respons’ presence in Germany seems crucial for Akka: the company believes it can cross-sell Data Respons’ digital capabilities to its German automotive clients and add EUR 200m in revenues by 2022, along with an additional EUR 25m in EBITA.
Akka was keen to highlight the Data Respons does not signal the end of its development in the US market. Growth in North America remains a priority, and so does growing its digital business in France. Akka had, however, a net debt of EUR 369m at the end of H1 2019 and has a proforma gearing of 150%, up from 131% before the Data Respons transaction. The firm will need to put its M&A strategy on pause, we think.