Tesserent (ASX:TNT) share price rises on acquisition news

The Tesserent share price closed higher today after the company announced details of another acquisition. We take a look at the details.

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The Tesserent Ltd (ASX: TNT) share price closed 4.65% higher today after the company announced the acquisition of iQ3, a major private cloud provider for secure data. During intraday trading, the Tesserent share price rose as high as 23 cents before closing the session at 22.5 cents. It feels like just yesterday I was writing about another Tesserent acquisition, this being their third so far this month.

What iQ3 does

iQ3 is a secure cloud services firm headquartered in Sydney. It provides services to internationally established brands in Australia and Singapore, with particularly strong ties to New South Wales state and local governments. The firm has been delivering secure cloud infrastructure and related services to a long list of government agencies since 2010.

Furthermore, iQ3 has an excellent operating record. The company had FY20 turnover in excess of $25 million, delivered $3 million earnings before interest, taxes, depreciation and amortisation (EBITDA) and is immediately earnings and cash flow accretive to Tesserent. Strong revenue and earnings are expected to continue into FY21.

Importantly, more than 70% of iQ3's revenue comes from recurring, multi-year, annuity-based contracts. The now gives the Tesserent group in excess of $30 million annual recurring revenue from multiple, locked-in contracts.

What's moving the Tesserent share price?

The Tesserent share price was on the rise today as the company announced this strategic acquisition. The cyber-security provider announced the acquisition of iQ3 with the signing of a share purchase agreement executed between both parties. Investors will no doubt be pleased as iQ3's services and solution offering materially complement Tesserent's 'Cyber 360' strategy.

Furthermore, by introducing iQ3 into the group, there are considerable Cyber 360 cross and up-sell opportunities at a customer, geographic and solution level. 

Additionally, there are also notable benefits associated with iQ3's operations centre and Tesserent's existing ISO-certified security operations centre in relation to the delivery of associated cloud, connectivity and new managed security services capabilities.

Foolish takeaway

Significantly, the acquisition sees Tesserent expeditiously achieve its goal of $100 million turnover on an annualised basis. This marks an increase in excess of 1000% since the refresh of the Tesserent board in January 2020. It also contributes to the existing impetus that has seen the Tesserent share price soar 462% so far this year.

Motley Fool contributor Daniel Ewing owns shares of Tesserent Limited. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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