Akka Secures 64% of Data Respons’ Stock

/ February 12, 2020/ Akka, Financials, France, M&A (large, with revenues above $50m), Norway

After its unexpected revenue growth slowdown in Q4, Akka suffered from a disappointing result: it secured only 64% of the shares of Data Repons. Akka has received regulatory clearance from the German cartel office authority, so now has control over Data Response.

However, the tender offer’s result is a disappointment. At the time of the acquisition announcement, Akka had received an irrevocable commitment from several shareholders, representing 43% of Data Respons’ shares.
Also, Akka’s offer seemed generous, providing a 20% to 30% premium and valuing Data Respons to a PER of 25, a high level we think.

Initially, Akka was targeting 90% of the shares of Data Respons. It seems that the company will be happy with only two-third of the shares, even if this means keeping Data Respons listed

Officially, Akka was only targeting revenue synergies and guided the market for EUR 200m in additional revenues by the end of 2022. However, with a joint presence in Germany, targeting the same automotive OEMs and suppliers, cost savings must have been on the mind of Akka’s management too.

In the meantime, Akka management has worked on re-establishing investor confidence: Akka’s share was down by 18% on the day of the Q4 2019 revenue announcement. It has regained some ground since thanks to Akka’s management announcing it would be buying additional shares (but sadly, without providing financial details). Akka is also initiating a share buy-back program, targeting up to 1.2% of its capital for a share price of up to EUR 75.

Akka’s management will be keen, we think, to highlight the expected slowdown and the disappointing tender offer results are only temporary. Akka is a growth story, having grown through large acquisitions to a top 5 position globally, with a solid presence in three key engineering and R&D markets: the US, Germany, and France. We still think, however, that Akka is now paying the price for its lack of sector diversification. Also, we would like the firm to start building an offshore presence.