Kontrol Technologies Corp. (Toronto), a specialist in smart building technologies, on Aug. 3 announced the completion of its previously revealed acquisition of Global HVAC & Automation Inc. (i.e. Global), along with that company's "record revenue order book of $155 million," per a Kontrol statement.
"We are excited to complete such a significant acquisition, which adds substantial new revenues and the largest consolidated revenue order book in our operating history," commented Paul Ghezzi, CEO of Kontrol. "This acquisition brings with it an impressive roster of new customers and technical capabilities, which we believe should create many potential lucrative cross-selling opportunities. As such, the acquisition of Global has the potential to drive significant growth and scale for Kontrol over the long term. With a consolidated revenue order book of $155 million, we are well poised for our next stage of growth."
In its corporate outlook post-acquisition, Kontrol anticipates full year revenue for 2021 will be in the $38 million range, up from $13 million in 2020, with an anticipated 2021 Adjusted EBITDA of $3.7 million. For 2022 Kontrol anticipates revenues in the range of $65 to $70 million and Adjusted EBITDA in the range of $4.5 to $4.8 million.
Business synergies
Global provides integrated installations of complex heating, cooling, ventilation and building automation systems to its customers.
Kontrol notes that heating, ventilation, and air conditioning (HVAC) systems can account for up to 70% of overall energy consumption in commercial buildings, and that efficient and smart HVAC systems can drive important intelligence and improvements to make buildings more sustainable, profitable and healthier.
Kontrol already provides its customers with a growing range of internet of things (IoT) and cloud-based technology to optimize heating, cooling, and ventilation, as well as overall energy management and emission reduction. Kontrol specializes in the provisioning of real-time monitoring, asset optimization, data analytics, and enhanced facility management. This is driven by Kontrol's smart-learning software platform, which the company contends provides it with a crucial competitive edge.
In terms of business synergies, according to a Kontrol statement announcing the acquisition, "Global's service offering complements Kontrol's existing product portfolio neatly. The combination of the two [companies] is expected to create significant growth opportunities over the coming years. Global has traditionally focused on larger projects, with one-time project revenues. A small percentage of its overall business is in recurring service and asset maintenance. Global will operate as a subsidiary of Kontrol with its current management team in place. Kontrol will seek to grow Global's recurring revenues through vertical integration with its current software and ongoing service agreements."
Kontrol notes its SmartSite platform integrates into building automation systems and provides a data analysis, reporting and smart learning algorithms to drive improvements in overall energy management and sustainability. Kontrol says it will integrate its facility management with the Global project platform to drive software revenues. Kontrol also operates a facility management platform with ongoing and recurring revenues to manage energy assets and optimize them for performance, and it will also integrate its facility management with the Global project platform to drive service revenues.
Currently Global outsources building automation improvements to third party contractors. Post-acquisition, Kontrol says it will internalize building automation installations. Kontrol also said it will work diligently to reduce costs by reducing duplication of staff and focusing on in-house project capabilities to drive full vertical integration across its customer base.
Kontrol also notes its Kontrol BioCloud platform can be integrated into each HVAC installation delivered by Global to provide real-time monitoring for virus and pathogens.
Transaction details
Pursuant to the agreement, Kontrol reports has acquired all the outstanding shares of Global HVAC & Automation Inc. for the purchase price of $7.25 million and any additional contingent performance-based consideration. The purchase price is subject to adjustments for working capital balances at closing date.
The purchase price is settled by the following consideration: (i) $3.5 million in cash on the closing, subject to customary post closing adjustments and reconciliations; (ii) $3.5 million Vendor Take Back at 3% annual interest rate with bullet repayment at the end of 3 years from the closing date (iii) a vendor performance payment equal to 45% of adjusted 3 years cumulative earnings after-tax in excess of $4.5 million.
Additional information about Kontrol Technologies Corp. can be found on its website at www.kontrolcorp.com and by reviewing its profile on SEDAR at www.sedar.com.
