Next Fifteen Communications plc (LON:NFC) (NFC.L) has announced the acquisition of predictive analytics and data marketing business Planning-Inc. It is a UK-based marketing, data and technology agency which will continue to operate as an independent brand as part of the Next Fifteen Network.
The initial consideration is around £6.3 million. This is made up of £5.4 million in cash, as well as the issue of 187,943 shares in Next Fifteen. There may be further deferred contingent consideration in April 2019 based on the EBITDA performance of Planning-Inc for the 2018 financial year.
There may also be further consideration payable in April 2021 and April 2023 depending on the EBIT performance of Planning-Inc in future years. The maximum total consideration is expected to be £15 million.
The acquisition is due to be earnings accretive in the first full year of ownership. The senior management team of Planning-Inc will remain in place. For the 2017 financial year, Planning-Inc’s EBIT and pre-tax profit were both £1.3 million, with the company having gross assets of £2.7 million.
In my view, the acquisition appears to fit in with Next Fifteen’s overall strategy. In recent years it has sought to increase its exposure to more sophisticated data and analytics solutions that are able to deliver improving return on investment for clients.
With the company’s shares currently trading on a P/E ratio of around 15, I think they could offer fair value for money. Although there are potential risks to global growth, the company appears to have a sound management team and a strong strategy, with its EPS growth forecast to be around 9% in the next financial year.
Therefore, while its share price has come under pressure in recent months as the wider stock market has struggled, I remain optimistic about its investment prospects over a long-term timeframe.