Xenith IP Acquires Firm Almost 1.5 Times Larger than Itself
Posted at Legal Practice Intelligence - 28 November 2016
Xenith has suddenly moved up from a distant third place
in size to match the scale of its two rivals
Xenith IP has announced a binding agreement to acquire Griffith Hack. It is a deal worth $172 million to the principals of Griffith Hack, made up of $83.6m cash, $68.4m worth of Xenith shares and a potential earnout bonus of up to $20m.
This is the biggest acquisition of its type in the Australian IP market, which has seen a series of market-transforming mergers and acquisitions over the past two years. The size of the deal is on par with the original float of competitor IPH Limited around two years ago.
This year, Xenith IP acquired Watermark. The combined Xenith and Watermark revenue (pro forma FY16) was $51.1m. It is acquiring Griffith Hack which had FY16 revenue of around $74.3m. At FY16, Griffith Hack had 104 professional staff compared to 71 for Xenith/Watermark.
What these numbers show is that the entity being acquired is almost 1.5 times the size of the entity acquiring it.
Xenith has had to raise funds from equity investors as well as increase borrowings. According to the company, “The cash component of the Acquisition consideration will be funded by a fully underwritten $67.5 million 1-for-1.33, pro-rata, accelerated, non-renounceable entitlement offer at $2.40 per Xenith share and $21.8 million by way of amended secured debt facilities (net of transaction costs).”
Following the acquisition, it is projected (as per investor presentation) that Xenith IP will be a $125m-revenue company with $198m intangible assets (goodwill) on its balance sheet and liabilities of $92m.
Xenith’s big bite takes it from being a distant third place player, in terms of size, to a scale that puts it into the same league as IPH Limited and Qantm.
Commenting on the Acquisition, Mr Stuart Smith, Xenith's Managing Director, stated:
"Griffith Hack has a distinguished history of over 110 years and today is one of the largest IP firms in Australia by patent and trademark filing market share. The acquisition of Griffith Hack is transformational for Xenith and brings together Shelston IP and the recent acquisition of Watermark. This is an exciting opportunity for Xenith to continue with its stated vision of becoming the leading IP services provider in the Asia Pacific region and we are very excited to work together with Griffith Hack and its existing team to grow the combined business under the Xenith banner."
David Hughes, Chairman of Griffith Hack, commented:
"The combination of Xenith and Griffith Hack is a watershed event for their personnel and shareholders. It will create a leading Australian IP group with an enlarged customer base, increased scale and greater scope of service offering to our clients. We look forward to joining Xenith and working together to execute upon our shared strategy."
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