ReadyTech Holdings Limited (ASX:RDY) has signed a Sale and Purchase Agreement to acquire IT Vision for AUD 54.6 million on June 16, 2022. Consideration consists of Upfront Consideration of AUD23.1 million paid using a combination of 50% cash and 50% scrip, which includes AUD11.55 million payable in cash and AUD11.55 million payable through the issue of ReadyTech shares prior to allotment. Earnout Consideration up to an additional AUD 31.5 million, subject to the achievement of certain revenue and EBITDA milestones. Earnout Payment will be made in three tranches wherein AUD 6 million paid in first and then AUD 11 million and AUD 14.5 million will be paid in later tranches. The earn out consideration may be paid in cash and/ or, subject to shareholder approval, ReadyTech shares, at the vendors' election. Ordinary shares issued to IT Vision vendors subject to escrow until the release of ReadyTech's 31 December 2022 audited half year accounts.The upfront cash funding requirement of AUD 11.55 million will be funded through drawing additional debt from existing debt facilities. Future cash payments to fund the Earnout Consideration are intended to be funded via existing cash and group operating cashflows. The acquisition enhances ReadyTech's position as a leading local government software provider with the addition of 190 local government customers. Aggregate maximum consideration is AUD 54.6 million, based on a 3.5x multiple of AUD 15.6 million revenue milestone, in addition to recurring revenue and EBITDA margin milestones. Maximum leverage at the time of completion will be 1.5x proforma FY22 EBITDA. Leverage is expected to reduce below 1x EBITDA within 2 years of acquisition completion.

Transaction is subject to satisfaction of conditions precedent, including necessary regulatory approvals (including necessary ASX waivers and confirmations), receipt of consents under material contracts, raising of debt funding sufficient for the transaction, no material adverse event occurring and key management not having terminated or resigned from their employment. No shareholder approval is required for completion of the acquisition, however ReadyTech currently intends to seek certain shareholder approvals at its 2022 Annual General Meeting to be held in November 2022 in order to facilitate the payment of all or part of the Earnout Consideration in scrip (which will be at the election of the sellers).ReadyTech will seek shareholder approval at its next annual general meeting to issue redeemable preference shares to the vendors of IT Vision which will be convertible into ReadyTech shares based on the lower of the 5-day and 3-month VWAP of ReadyTech shares prior to allotment. If shareholders do not approve the issue of the redeemable preference shares, all earnout payments must be paid in cash. Acquisition completion is expected by 31 July 2022. EPS accretive in FY22 on a pro-forma basis before synergies and excluding integration costs. Ernst & Young Australia acted as financial due diligence provider to ReadyTech Holdings Limited (ASX:RDY).

ReadyTech Holdings Limited (ASX:RDY) completed the acquisition of IT Vision for AUD 53.2 million on July 25, 2022.