Hansen Technologies searches for deals while remaining a target

Hansen Technologies, led by Andrew Hansen, is cashed up and ready to spend, but such groups are now also likely to attract bids from buyout funds.

Hansen Technologies is on the hunt for acquisitions – that is if a suitor does not beat it to the punch and make a bid for the company first.

After private equity suitor BGH Capital walked away last year from buying the business for $1.3bn or $6.50 per share, many market experts have not given up on the possibility that it remains in the cross hairs of another suitor.

After all, the talk in the market is that there are more mergers and acquisitions on their way in the coming weeks for Australian listed groups, and the sweet spot for investors is seen by many as technology providers for industrial companies.

Hansen’s market value is currently $1.1bn, or $5.25 a share.

The group on Monday delivered an underlying profit after tax of $23.6m for the six months to December, up 13 per cent on the previous corresponding period, while its earnings before interest, tax, depreciation and amortisation was $54.2m.

Hansen, which provides billing software for telecommunications companies and utility companies and back office software for telcos, flagged that mergers and acquisitions were on the agenda.

The global market is ripe for consolidation, which is why the company has appealed to private equity in the past.

Europe has been a fertile hunting ground for Hansen in previous years, while Canada has also provided opportunities.

China is unlikely to be targeted due to intellectual property risks.

Hansen has historically focused on markets with dynamic pricing and returning customers, and while it would be likely to pursue companies in the telecommunication and utility segments, it may also move into similar markets that are defensive, such as insurance.

Analysts from RBC believe that the largest acquisition that Hansen could undertake without raising equity would be $250m.

BGH’s attraction to the business is thought to have been its relatively low valuation and defensive nature amid the global pandemic.

It also has limited debt, recurring revenue and generates plenty of cash flow which appeals to buyout funds, as does its ability to withstand large levels of debt.

In an Ord Minnett research note, analysts said that Hansen’s funding capacity for M&A was more than $350m, and that when it came to M&A, its track record was excellent.

Last year offered evidence that groups in the technology space that were cash flow positive once valuations corrected were the companies that were attracting buyout proposals.

This included Hub24’s $386m bid for superannuation administrator Class, BGH’s bid for Hansen and Autodesk’s $5bn for computer software company Altium, although the deal did not complete.

Other potential takeover targets in the software space could be mobile app provider Whispir, with a $235m market value, online learning provider Keypath Education, worth $541m, HR software provider Elmo Software, worth $364m and online training software provider ReadyTech Holdings, worth $345m.