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Transaction
Case Studies

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 bwalko@sokoloffco.com with your contact information.

Archives > Transaction Case Study 81

SOKOLOFF & COMPANY CASE STUDY:
Comtech Buys TSYS

DATE ANNOUNCED: December 7, 2015

BUYER: Comtech Telecommunications Corp.’s (NASDAQ: CMTL) direct wholly owned subsidiary Typhoon Acquisition Corp.

SELLER: TeleCommunications Corp. (NASDAQ: TSYS)

PURCHASE PRICE: Cash tender offer of $5.00 per share.  The total being paid for all outstanding shares, options, warrants and other equity instruments is $339.7 million.

SELLER’S FINANCIAL INFORMATION AND M&A MULTIPLES

Year

2013

2014

Trailing Twelve Months
through
September 30, 2015

Revenue

$362.29M

$359.84M

$364.13M

EBITDA

($3.2M)

$29.58M

$35.38M

Adjusted EBITDA*

 

 

*$40.4M

Cash

 

 

$51.64M

Debt

 

 

$143.56M

Purchase Price

 

 

$339.7M

Enterprise Value

 

 

$431.62M

Multiple of Revenue

 

 

1.19

Multiple of EBITDA

 

 

10.68

*Adjusted to add back in share based compensation and transaction related expenses.

TRANSACTION DRIVERS
Comtech’s presentation of the deal lists a number of advantages.  With the acquisition Comtech doubles in size and achieves a more diversified customer and product base, along with a strong entrée as a prime contractor for local, state and U.S. government business.

Maurice B. Tosé, President and Chief Executive Officer of TCS, said, "The TCS Board of Directors and management believe this strategic combination with Comtech is compelling and provides significant benefits for our stockholders, customers and employees. Our customers will benefit from greater resources and more diverse product offerings, and our employees will benefit from being part of a larger more diversified company."

SOKOLOFF COMMENTARY:
We applaud the transaction.  The merger is a bold move and should serve to energize management teams at both companies.  Each have foundered in recent years, seeing revenue growth taper off and start downward.  This is a fresh start and an opportunity to utilize many excellent technology assets in a more productive manner.  The integration promises additional EBITDA from cost synergies but management would be wise to focus on long term revenue growth.  Short term synergy savings should be approached with caution; as such actions often negatively impact future growth.

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