Valuing the Cable Logic Acquisition

Tempo's was effectively is receiving a deferred payment of $33,000 for the Cable Logic acquisition. They paid $250K + $317K with rights to receive $600,000 , presumably the accounts receivable. As detailed in the presentation personal and accounting functions will be relocated to the Tempo offices. The average revenue for the last 3 years has been $15M PA. To assess the value of the deal one can refer to the recent acquisition of Datatel by Southern Cross Electrical, SXE. If we assume Cable Logic will generate $15M PA, and has the same EBITDA margins as Datatel of 7.58% TPP would have paid Initial Consideration of $4.13M, Deferred Consideration of $2.3M and Stretch Consideration of $5M if the same out performance targets were met. The calculations are on the basis that Cablelogic has 66% of Datatel's $22M revenue. The total that would have been paid by TPP would have been $11.43M . Caution this is a rough speculative estimate as we don't know what cash, accounts R and P, tangible assets, Datatel had on it's balance sheet. A second approach to the valuation is to take the projected $15M revenue and assume an EBITDA margin increasing to 9% for Cablelogic ( no Perth rent now, $150K - $175K a guess ?) and savings in integration of back office functions. At $15M Revenue that's $1.35M EBITDA at $20M revenue $1.8M EBITDA. At 10% DA and 30% TAX the range is $850K to $1.134 NPAT. On a PE of 8 that's $6.8M > $9.07M valuation for a company they were paid $33,000 to take over.