- $75 million acquisition of US customer support platform
- Shares fall after strong run and overpaid concerns
- Combined businesses provide compelling offer to clients
Creative services provider to the video gaming industry Keywords Studios (KWS:AIM) has agreed to buy Helpshift Inc, an innovative consumer-facing digital support platform for up to $75 million.
Despite CEO Bertrand Bodson insisting the tie-up will help the company to provide a ‘compelling offering for our clients’ investors seemed more concerned about the price paid, with the shares falling 1.4% to £29.06.
The less than enthusiastic share price reaction was no doubt also influenced by strong recent gains with the shares up 31% over the last six weeks.
PUNCHY PRICE
The proposed acquisition price implies 37.5 times Helpshift’s expected 2022 EBITDA (earnings before interest, tax, depreciation and amortisation) and 3.7 times expected revenues.
The purchase price is not based on near term earnings but expected future earnings and on this basis the EBITDA multiple (9.4) looks more reasonable assuming Helpshift delivers on the growth.
Keywords said revenues are expected to grow ‘strongly’ in 2023 and beyond while increasing scale will support growth in EBITDA to over $8 million by 2024 at a similar margin (around 20%) to the group.
STRATEGIC FIT
Keywords has a long-standing partnership with San Francisco-based Helpshift which has developed a ‘market leading’ proprietary SaaS (software-as-a-service) automated customer support tool. It works in real time within client apps to solve customer issues.
Helpshift will be integrated into Keywords’ Player Support business and be enhanced by Keywords’ Kantan AI (artificial intelligence) studio which will expand the number of languages supported Helpshift’s platform.
Keywords said combining the two companies’ capabilities will create a ‘market leading customer support platform’ and enable 2,000 experienced support agents to provide higher value customer interactions.
EARNINGS UPGRADE BUT REDUCED TO HOLD
Shore Capital analyst Katie Cousins believes the acquisition will lead to a low to mid digit percentage upgrade in EBITDA estimates but downgraded the shares to hold.
Reflecting on the 2022 price to earnings ratio of 29 times Cousins commented: ‘This appears full, in our view, with the shares within 10% of our last published fair value (2750p).’
