SimplyBiz (SBIZ:204p), a provider of compliance, business and technology services to 3,726 financial intermediaries, has announced the earnings accretive acquisition of Defaqto, a financial technology business operating a fintech platform for 8,500 advisers and providing independent ratings of financial products and funds.
Trading for over 25 years, Defaqto is a high margin cash generative business that is built on a regulatory and capital light model. Around 96 per cent of its 2018 revenues of £12.8m came from repeat and recurring business which delivered cash profit of £5.3m at an eye-catching profit margin of 41 per cent. Defaqto makes its money by collecting data on over 40,000 financial products and funds and then providing independent information to help banks, insurers and fund managers to get a complete overview of the financial products available to consumers so that they can make more informed decisions. The business also provides comparison sites and product manufacturers with information to assist consumers.
The £74.3m acquisition is being part funded by a £29.1m institutional placing of new shares, at 180p, a £37.5m increase in SimplyBiz’s revolving credit facility, the issue of shares worth £7.5m to the vendors, and using £3.1m of cash on SimplyBiz’s balance sheet. There is a strong strategic rationale behind it.