SMALL CAP IDEA: Why Accesso Technology’s takeover of VGS could be ‘one of the savviest acquisitions of the year’
Has the ticketing technology provider for theme parks Accesso Technology Group simply execute one of the smartest acquisitions of the year by a small cap listed on the AIM?
The deal in question relates to Accesso’s $38.5 million (£30.1 million) acquisition of VGS, a similar type of company that nevertheless brings a lot to the table.
Before we go any further, you may be wondering what an “amusement park ticketing technology” provider does. A mouthful perhaps, but the concept is simple enough.
Thorpe Park is one of the theme parks that Accesso provides services to
Accesso’s technology stack drives ticket sales at theme parks, ski resorts, music venues, festivals, and just about any other event that requires a ticket, all while improving the guest experience.
Previously (the company was founded in 2000 under the name Lo-Q before rebranding as Accesso in 2013), this queuing technology required customers to carry a pager-like device called a Q-bot.
Today, customers simply use their smartphones to pre-book a theme park ride, performance, or exhibition, while avoiding long, tedious lines.
Revenue is generated by cutting a portion of ticket sales and licensing the group’s technology to third parties.
After recovering from the dark spell of the Covid era, accesso enjoyed a record year in 2022 with sales of $145m (£114m) generating approximately $26m in underlying revenue.
This cash-generating year (even with a $2.5 million currency hit) laid the groundwork for accesso’s acquisition of prominent rival VGS for $52.6 million.
A tactical move in more ways than one. Not only did it significantly expand the addressable market of accessories in countries such as Japan, Singapore, China, Dubai and Egypt, but it also brought one of the largest entertainment brands in the world under the umbrella of accessories.
Which brand exactly is a secret for now, although perhaps not very well kept.
“(VGS) has as a customer the number one theme park destination in the world, located in Orlando. You can work out who that could be,” said Accesso CEO Steve Brown.
I hope this mysterious destination doesn’t have a mouse problem.
Whoever it may be, the client adds to an already remarkable portfolio that includes Merlin, Six Flags, owner of all major UK destinations, including Thorpe Park, and Village Roadshow, owner of Australia’s popular theme park Movie World.
The integration of VGS also adds one of the Seven Wonders of the Ancient World to the customer list: the Great Pyramid of Giza in Egypt.
Brown said he was “extremely excited to announce the “transformative acquisition of VGS, a company I have long admired and respected,” calling the group “perhaps the most versatile and robust platform for this type of company on the market today.” market is’.
As for the acquiree, VGS CEO Paolo Moro said he was “delighted” to join forces with accesso, noting that “our technology is complementary to accesso’s offerings.”
The technology platform for ticketing and visitor management from VGS has now been renamed accesso Horizons.
According to accesso, VGS has been consistently profitable with pro forma profits of approximately $4 million in 2022 and would immediately add to earnings.
So a profitable, formerly competitive company with huge theme park customers, ancient wonders, and global reach, bought at 10-fold of its historical underlying earnings.
It sounds like a good buy, right?
One broker saw a 10 percent EBITDA increase for accesso for fiscal year 2024, with earnings per share rising from 25.6p to 37p.
We view this as an exciting acquisition for the Group, complementing its existing growth strategy and providing medium to long-term opportunities for a respected global client list.
In terms of current valuation, accesso sits at a share price of 772p with a market capitalization of £320m.
The VGS acquisition seems to have gone somewhat under the radar, with accesso’s share price only up 2 percent since its Tuesday, June 20 announcement (although it briefly jumped to 822p immediately after the press release)
Investors should have time to think about the accesso’s latest addition. Brown said his group is done shopping for the coming year.
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