Discl: Held IRL and in SM

@Bushmanpat , I hear you and somewhat feel the same. To get my head around it, I went back and summarised all of ALC’s ASX announcements on M&A’s since it listed in 2016 to get a sense of how it does its M&A’s as I was only across the last Silverlink acquisition in Dec 2021. Having done this exercise, I do feel a bit more “prepared” to deal with/evaluate an M&A, which, given the very clear signaling, feels like sooner rather than later, and I am more confident of ALC's ability to integrate new software acquisitions.

Summary of Thoughts

1. Probably fair to say that ALC is absolutely on the hunt to acquire a combo of customers and capability in (1) Canada (2) Aged Care (3) Community Care - it is typically far cheaper and faster to buy a software and bolt it on to Miya vs building from the ground up, so it makes sense to buy something to grow.
2. The timing also makes sense - ALC is now at the inflection point of profitability, the NHS contracts are happening in a steady cadence, and thus far, there appears to be no open drama’s around deployment - the news on the deployment front has been regular and positive.
3. Cash on Hand of $17.7m is not much of a M&A war chest given the M&A history, and so an accompanying capital raise should be expected, unless the acquisition cost is small, say less than A$5m.
4. So long as the M&A makes sense (see below), I am not overly concerned, upfront, about ALC’s ability to integrate and digest the software it acquires - while the track record is not Wisetech-like huge, the relative ease in which ALC digested the Silverlink PAS provides reasonable confidence that it can deal with reasonably chunky bolt-ons. From the way the announcements are worded, it feels quite clear that the ability to bolt on the newly acquired software into Miya is a big consideration in the acquisition - have thus far, seen nothing that warrants concern.
5. Need to be hyper vigilant for share pump exercises from hereon as that could well signal that an M&A/Capital Raise is imminent ...

ALC’s M&A History

1. Each of the acquisitions do make sense in that (1) it adds new functionality, some significantly chunkier than others (2) brings new customers to ALC and expands its footprint - there has not been any acquisition that did not make sense.
2. Each acquisition have been, at face value, revenue and EBITDA accretive
3. There was an equity raise that accompanied each acquisition
4. The size of the company acquired varied significantly - from NZ$3.0m for Oncall to A$55.5m for Silverlink
5. The integration/merging of the newly acquired solutions into the Miya Precision platform do not look to be onerous or problematic - this does make sense given that Miya Precision is designed to be open and modular - each of these should bolt on in a reasonably straightforward way. I can’t recall there being any issues or concerns around integrating the largest acquisition, Silverlink’s PAS.

How I Would Evaluate a Future ALC M&A

• Functionality it adds must fill a Miya Precision gap pre-acquisition, the adjacency is easy to understand and the value to a healthcare customer should be relatively easy to understand
• I would be very cautious with software which has an AI-centric positioning - the value-add reality must match the AI hype
• Adds new customers in the geographies and/or adjacent care areas - the larger the customer base the better
• Provides upsell opportunities to existing ALC customers, particularly the NHS Trusts
• The bolt on/integration to Miya does not appear to be onerous ie. it does not overwhelm ALC
• Revenue and EBITDA accretive