This Acquisition makes a lot of sense to me, although price paid is on high multiple, the high-profit margins
Explains that. there is limited market share RXP can grab in the IT been based in Melbourne.
they are now expanding to Sydney, so a new large market is opening up for them due to this Acquisition.
Digital, besides being a huge market also enjoys nearly double the profit margins, ( hallelujah).
try and imagine the cross selling and offering enhancement between those two companies.
The excitement for growth will come from RXP customer using " the works" for digital services, so all of a sudden the promised 16.5 mil revenue, and EBITDA of 3.9 mil for FY 18 grow tremendously on the back of
RXP current clientele, cross selling also works on the other direction but for smaller margins.
To use a metaphor, imagine RXP was a fruit n vegie shop in a particular suburb. it has competition and can only earn an Ebitda of 13% on revenue/product offering in an ever competitive environment, to survive and compete better they buy a delicatessen in another suburb merge the products and create a new model. Then diversify into Other products with higher profit margins that enlarge their total offerings. later on, you can order online and the combined companies do home delivery ,,,and on and on comes efficiency, expansion, synergies, cross selling and ever changing and adapting business model `that transforms and evolves itself to better its performance with the changing landscape and times. to be successful in executing this model that ever evolves and merges you need trustworthy Mangmnt, so far RXP has done well.
on the other hand not growing with the times, i would have probably exited the company, due to a limited growth and squeezed margins.
