Have now had the chance to absorb the announcement - my views:

Positives

Good recurring income stream

Appears to be a reasonably priced acquisition - 1.5x EBITDA (forecast)

Results in a lower EV multiple for the full group (at current prices) - around 3.2x post cap raise on FY24 forecast

EBITDA rises from $5.4m for IMG standalone to $24.8m proforma for the combined entity (FY23)

EBITDA forecast of $31m (FY24) against market cap of $32.1m post cap raise (before the big share price rise of last 2 days)

High accumulated tax losses, so Pre Tax profit should fall to bottom line

Very high ROE post transaction

Debt multiple is coming down to a "bankable" number in FY24 - assuming they hit forecast

Simplification (read Synergies) are interesting, and present good upside

Negatives

Debt they hold is expensive - and dilutive - typical distressed debt style deal with upside for lender if it comes off (noting this is a turnaround) - shareholders will be diluted (approx. 7 %)

Debt is not small - $66.7m net

The restructuring costs seem really high ($14m!) - when you take those into account, the purchase price doesn't look quite as good

Betting on a turnaround, and a jump in ADT's earnings FY24

FCF is a lot lower than profitability - due to treating restructuring costs as one-off. Surprised that OCF is quite low compared to EBITDA

Integration will be interesting, a smaller business acquiring a bigger business is always a challenge

Recommencing commercial installations which ADT were exiting. There's probably a good reason they were doing that...

So - what to do? IMG look like they're on the right track, and at current multiples it's attractive. But, I worry about execution risk and merging a much larger business into a smaller one. Others might be more risk tolerant but for me the risks outweigh the upside at the moment and I'm not going to invest, but definitely keep tracking the situation. With a little more track record and seeing how the merger works out over the next half/year, it might be something I invest in.

Rich