IPW generated $1.56 million in EBITDA in FY18 and is projected to grow these earnings by 28.2% to $2.00 million in FY19.
The purchase price represents a competitive 3.75x EBITDA multiple using the average of FY19, FY20 and FY21.
The acquisition is conditional to GO2 completing a capital raising and GO2 is seeking to raise up to $4.0 million through the issue of shares priced at 7.5 cents with an attaching option exercisable at 10 cents.
IPW generates revenue from training services
Established in 2011, IPW is one of Australia’s fastest growing Registered Training Organisation’s (RTOs) delivering high-quality fee for service training.
Notably, it does not rely on government funding.
IPW specialises in providing training and education in the mining and medical sectors, ranging from Certificate III’s through to Diploma level qualifications.
The Gold Coast based company has 25 staff and delivers 80% of its courses online with the remaining 20% being classroom based.
High-margin business to increase overall margin
IPW is a high-margin business compared to its peers with its FY19 EBITDA margin expected to be 33%.
To put this in context, $100 million labour hire businesses typically generate EBITDA margins of around 5%.
Notably, IPW’s high-margin business is expected to increase the blended margin in the combined GO2 Group in FY20 and beyond.
Over time, GO2 believes it can increase IPW revenue and maintain margin through the benefits of scale and technology leverage.
Acquisition to provide revenue synergies
IPW complements GO2’s recruitment business, with potential to cross-sell IPW training programs to GO2’s 175,000 job applicant database.
Cross-selling is not the only potential revenue synergy the acquisition proposes with other opportunities including increased customer, industry and geographic diversification.
The GO2 People is a leading Australian provider of vertically integrated recruitment, training and building services.
Its estimated group revenues for FY19 total $48 million across three divisions - recruitment, training, and building.