Dye & Durham to Buy Link Group; Shares Pop

Dye & Durham (DND), a provider of cloud-based solutions for legal firms, has announced it has signed a deal to acquire Australian-based Link Administration Holdings Limited for C$3.2 billion.

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As part of the deal, Dye & Durham will also indirectly acquire Link Group’s 43% stake in the recently established ownership transfer business PEXA Group Ltd.

Becoming a Global Player

Under the terms of the acquisition agreement, Dye & Durham will acquire Link Group for cash consideration of approximately C$3.2 billion, or A$5.50 per common share, representing a 15% premium to the closing price of Link Group shares on the ASX on December 21, 2021.

This acquisition is a major expansion for Dye & Durham that will quintuple its annual revenue base. The Canadian cloud-based software provider estimates that it will be able to realize cost synergies of approximately C$125 million following closing.

CEO Commentary

Dye & Durham CEO Matt Proud said, “This is a transformational acquisition for Dye & Durham and represents a major step forward in our ‘Build to a Billion’ strategy to achieve C$1 billion of adjusted EBITDA. This transaction will enable us to expand our proven model into adjacent markets, where Link Group’s products share the same attributes of our existing offering: digital infrastructure-like assets that provide essential services to clients and their customers and generate stable and sustainable cash flows. Link Group has achieved critical mass across multiple product categories in Australia and the United Kingdom – two of our key markets – and this acquisition both diversifies and strengthens our position in these geographies.”

Wall Street’s Take

On December 14, Scotiabank analyst Paul Steep maintained a Buy rating on DND and a C$60 price target. This implies 27% upside potential.

The rest of the Street is bullish on DND with a Strong Buy consensus rating based on four Buys and one Hold. The average Dye & Durham price target of C$61.40 implies 31.7% upside potential to current levels.