The Credit Clear Ltd (ASX: CCR) share price is plummeting after it announced that it's undergoing an acquisition worth upwards of $46 million.
To fund the transaction, the company is conducting a $29.5 million capital raise.
At the time of writing, the Credit Clear share price is 49 cents, 9.26% lower than its previous close.
Let's take a closer look at the news that's driving the financial services technology company's stock downwards.
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Credit Clear share price flops on new acquisition
It's not a good day for the Credit Clear share price despite the company announcing that its acquiring debt recovery solution provider, ARMA Group Holdings.
Over financial year 2021, ARMA reported $15.5 million of revenue and $6.4 million of earnings before interest, tax, depreciation, and amortisation (EBITDA).
According to Credit Clear, the acquisition will provide more than 400 new active clients and a 140% boost to its revenue.
That's expected to see Credit Clear bringing in $26.5 million in normalised, unaudited, pro-forma revenue on a financial year 2021 basis. The company also expects that its normalised, unaudited, pro-form EBITDA will increase to $3.9 million.
Finally, purchasing ARMA will help Credit Clear's technology reach further into the Australian market. It will also speed up its adoption in the receivables management industry.
Credit Clear will be paying $46 million for the acquisition, plus earnout payments.
Of that $46 million, 40% will be paid in scrip and the other 60% in cash.
To fund the cash component, the company has undergone a $25.5 million placement. Within the placement, new shares were offered for 40 cents apiece.
A share purchase plan is expected to see another $4 million raised at the same offer price.
The scrip consideration is contingent on shareholder approval, which the company hopes to get in January.
Following the acquisition, ARMA founders, Andrew Smith and Shane Ashton will continue to manage the business. Andrew Smith will also be welcomed to the Credit Clear board.
What did management say?
Credit Clear CEO, David Hentschke commented on the news driving the company's share price lower today, saying:
Credit Clear is at the forefront of a major global transformation in the way businesses interact with their customers. The ARMA acquisition provides us an opportunity to deploy this leading digital technology across ARMA's significant existing client base and to win considerable new business together.
