Wooden Camera is based in Dallas, Texas and privately owned by its management team, Ryan and Elizabeth Schorman. Both will remain with business post-acquisition. Wooden Camera will become part of Vitec’s Broadcast Division.
The press release announcing the acquisitions cites the opportunity to grow Wooden Camera through expanded distribution as part of Vitec’s global sales network. Also noted in the announcement is the opportunity for Wooden Camera to benefit from Vitec’s manufacturing and product sourcing capabilities.
As part of the acquisition announcement The Vitec Group disclosed portions of Wooden Camera’s recent financial results along with the high-level deal terms.
Wooden Camera generated an unaudited adjusted EBITDA of £1.9 million ($2.5 million) for the 2015 calendar year. Management indicated Wooden Camera has grown in the year-to-date period of 2016.
The upfront cash consideration is £15.3 million ($20.0 million), which is subject to post-closing adjustments. The deal also includes a potential earn out representing an additional £11.5 million ($15.0 million) of consideration. The earn out payments are based on Wooden Camera achieving “demanding” EBITDA targets for the financial periods thru the close of the 2018 calendar year. The 2018 EBITDA target is $7.3 million (this represents an almost tripling of 2015 EBITDA). Vitec will finance the transaction using its existing banking facility.
Using the 2015 EBITDA disclosure, the upfront consideration values Wooden Camera at 8.0x 2015 EBITDA (not including the earn-out). The total consideration has the potential to value Wooden Camera at 17.5x 2015 EBITDA. Since more than 40 percent of the total potential deal value is in the form of an aggressive earn-out, it is more appropriate to focus on the implied valuation of the upfront consideration. The multiple of 2016 EBITDA – though unavailable – is likely less since Wooden Camera has continued to grow.
To put these figures in context, The Vitec Group currently trades in the public markets at a valuation of 7.8x trailing twelve month EBITDA and 1.0x trailing twelve months of revenue (on an enterprise value basis).
The press release states “The Board expects the acquisition to be immediately earnings enhancing.” This statement is then clarified in the notes to the press release as follows, “This statement should not be taken to mean that earnings per share of The Vitec Group plc will necessarily exceed or be lower than historic earnings per share of The Vitec Group plc and no forecast is intended or implied. This refers to earnings before charges associated with acquisition of businesses.”
It is interesting to reflect on the impact of a weaker GBP currency on the transaction pricing. The “Brexit” referendum of June 23, 2016 precipitated a decline of the GBP versus the US dollar. A weaker GBP should – on balance – benefit Vitec’s revenue results. However, it will make expenditures in other currencies more expensive, including the acquisition of a US-based business as is the case with Wooden Camera. On June 1, 2016 the exchange rate was 1.44 USD / GBP. The figures in The Vitec Group press release were based on an exchange rate of 1.31 USD / GBP or 9% lower. Meaning, the acquisition in GBP terms was 9% more expensive because of the recent disruption in the GBP currency.
Commenting on the acquisition Vitec’s Group Chief Executive Stephen Bird stated, “I am delighted to welcome the Wooden Camera team to Vitec. Wooden Camera’s products are the glue that binds all the building blocks together on a professional camera system. This leading business complements Vitec’s strategy of providing premium branded broadcast products and services to our customers to capture and share exceptional images. The business has great prospects and we anticipate that it will generate a good return on our investment.”
© Devoncroft Partners 2009-2016. All Rights Reserved.