Banking on the fact that information technology companies have hit rock bottom, Radius Capital Partners LLC has launched a $75 million acquisition program called the Radius Merger Program. The intent is to acquire IT service companies and merge them with Unitas Corp., one of Radius’ portfolio companies that is widely viewed as the leading enterprise portal solutions and services company.
After spending the last year building out Unitas’ management team, infrastructure and technology, Radius is now looking to make Unitas an even larger enterprise portal through the acquisitions of complementary businesses, said John Hasset, a managing principal at Radius Capital.
“We believe that we are at the bottom of the IT service cycle. The value of IT companies are at the lowest they can get. We see the emergence of enterprise portals as a hot trend, and we want to create something this year. The only way to do that is through an acquisition program. In fact, this type of program is critical to IT companies’ long-term success,” Hasset said.
The program is set to acquire about four companies. However, depending on what is available, Radius could buy as few as two companies or as many as six by year end. Regardless of how many companies are bought, each will have revenue between $10 million and $20 million, while smaller high-quality companies will also be given consideration. Only companies that are at the break-even or better line will be looked at.
Acquisition targets will be consulting practices and integration services, knowledge and content management companies, and enterprise applications such as ERP, CRM and supply chain management. With Unitas based in Waltham, Mass., and Radius Capital based in Marblehead, Mass., the program will only be looking at companies located on the East Coast and Chicago for manageability purposes.
Although it seems that Radius’ timing is just right, according to Hasset, it is just a coincidence that the launch of the program coincides with low valuations of IT companies. “Our intention from the beginning with Unitas was to do this. When businesses were plummeting along with their values, we spent the time to build out an acquisition platform. And now we are ready to put companies on top of that platform,” he said.
The structure Radius plans to use includes putting in a significant cash and preferred stock component. Additionally, Radius plans to give Unitas, which is profitable, cash for working capital. Radius intends for Unitas to stay cash flow positive throughout the acquisitions.