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Peter A. Sokoloff & Co. regularly analyzes transactions which occur within the industries covered. An archive of these case studies is kept online as a courtesy to our colleagues. To receive by e-mail new case studies as they are prepared, please e-mail [email protected] with your contact information.

Archives > Transaction Case Study #14

Syniverse Technologies acquires Interactive Technology Holdings Limited

Dear Colleague, 

On June 16, 2006, Syniverse Technologies (NYSE:SVR), a provider of technology services to wireless telecommunications companies worldwide, acquired Interactive Technology Holdings Limited (privately held ITHL) for cash of USD$38 million at closing plus earn-outs of up to USD$7 million.  The acquisition will be accounted for as a purchase transaction and is expected to be accretive to earnings in 2006. 

ITHL, with 2005 revenues of $19.28 million and projected growth in 2006 of more than 32%, has its headquarters in Hong Kong. ITHL provides a variety of billing and OSS solutions to some 30 fixed line and mobile carriers in the Asia Pacific region. It has approximately 180 employees and nine regional offices, including offices in Singapore, Malaysia and Taiwan.   

Its EBITDA in 2005 was $4.34 million.  The base transaction price of $38 million is equal to 1.92x revenue and 8.7x EBITDA.  The major portion of the earn-out is based upon calendar 2006 revenue and EBITDA.  After a few other requirements which are tied to $2 million of the earn-out, $5 million of additional payments is dependent on ITHL reaching $25.5 million in revenue and $5.8 million in EBITDA during the 12 months ended December 31, 2006.  Thus, the full purchase price of $45 million is equal to 1.76x revenue and 7.75x EBITDA for calendar 2006. 

Syniverse, with revenues of $337.39 million (ttm), expands its footprint in the Asia Pacific region and adds a complementary customer base, new products, advanced development capabilities and in-region customer support. The company provides services to over 350 telecommunications carriers in more than 50 countries, including the ten largest U.S. wireless carriers and six of the ten largest international wireless carriers. Headquartered in Tampa, Fla., U.S.A., Syniverse has offices in major cities throughout North America, The Netherlands and the United Kingdom and a global sales force in the United Kingdom, Luxembourg, France, Italy, China, Hong Kong, Brazil, Slovakia and India. 

Syniverse’s stock price was at $14.73 per share prior to the SEC filing on June 16th and increased to $15.52 at the close of business on June 19, following the press release of this transaction.  This was a 5.36% increase in stock value.  This pushed Syniverse’s market cap up by $54.76 million.  

"The acquisition of ITHL is an important step in Syniverse's strategic plan for global expansion and product development," said Tony Holcombe, president and CEO of Syniverse Technologies. "ITHL provides many new customers, most of whom are GSM operators, and a strong set of advanced products, including prepaid, messaging, video and number portability products that complement Syniverse's existing suite of services. Additionally, ITHL expands our presence and provides us with additional development capabilities in the heart of the world's most advanced wireless market." 

Raymond Cheung, CEO of ITHL, said, "The combination of Syniverse and ITHL represents a strong strategic fit, and this allows each company to expand sales and marketing opportunities. With complementary product sets, ITHL is able to leverage Syniverse's scale and global customer base. Asia is a leader in 3G products and adoption, and ITHL has been a leader in that area of development. We now have an opportunity to provide these products to other operators around the world." 

We hope that you find this feature from Sokoloff & Co. interesting, informative and useful.  We welcome your comments and suggestions. 

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