Digital Barriers, the ‘buy-and-build’ homeland security market specialist, has made another small national security-focused acquisition. Tom Black’s team is acquiring Essential Viewing, for a maximum consideration of £4.85m on a cash-free, debt-free basis (the initial consideration is £3.4m). Founded in 1999, Essential Viewing is a spin-off from Strathclyde University. In FY10 it had a turnover of £1.4m, with an EBITDA of £0.07m. As Digital Barriers have been working with them on certain projects for some time they clearly know each other well - which minimises risk in any M&A transaction.
This is Digital Barriers’ fifth acquisition since its formation at the beginning of 2010. It looks to be another canny purchase that fits nicely within the company’s mid-market homeland security niche. According to Digital Barriers, Essential Viewing’s product enables the delivery of video across wireless networks with highly constrained bandwidths without compromising video quality – ideal for covert surveillance and operations in remote environments. Digital Barriers’ experience in large procurements and international markets should enable it to better exploit Essential Viewing’s potential, particularly in the Asia Pacific and North American markets. Digital Barriers already has a track record in these markets, indeed it announced a contract win in Asia Pacific today – a surveillance contract for a government customer valued at c£900k over 15 months.
Footnote from Richard Holway - Had an interesting conversation with Tom Black of Digital Barriers earlier today on the Essential Viewing acquisition. Up until now, Digital Barriers' acquisitions have been in the physical side of security, so I asked him about the cyber side which, currently, gets all the publicity. Black said he'd probably have to get into this side too, but at the moment the sector was 'over-hyped' and the companies therefore 'overvalued'. They might well do it organically if valuations stayed as strong as they are.
Note - Richard Holway is a shareholder in Digital Barriers