Oceanwide: A Quintessential Descartes (DSG-TSX) Acquisition

Yesterday, Descartes Systems Group announced that it has acquired privately held Oceanwide Inc. for $10.4 million in cash. Oceanwide provides compliance Software-as-a-Service (SaaS) to customs brokers and sports a 90% recurring revenue stream. The accquisition extends DSG's logistics ecosystem to include customs brokers, and probably adds annualized EBITDA of between $1.2 million to $1.5 million, and initial sales of between $5.0 and $6.0 million. This is without synergies - which are likely.

With close to $60 million in the bank, and an annualized cashflow of between $14 million and $16 million (depending on how bad the recession is), this could be considered a quintessential DSG tuck-under that meets the following criteria:

- fits strategically
- is accretive
- delivers synergies
- makes its clients happy
- helps set it up for a massive lift in earnings exiting the recession.

In my opinion, Descartes Systems Group is one of only a very few public Canadian small cap technology Companies that understands the leverage that can be gained from cashflow and a strong balance sheet during this recession. Descartes shareholders should be applauding.

Management teams from Companies like the aforementioned RDM Corp. (RC-TSX) (see previous post), should be taking notes.

I do not own shares in the Companies mentioned in this post, nor do I receive compensation from these companies in any way.

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