Australia’s largest financial services software group Rubik Financial has acquired two mortgage software companies in one fell swoop for $22.4 million upfront.
Rubik Financial announced on the ASX yesterday it has bought software provider Stargate Information Systems for an upfront $20 million, with a further payment of up to $15 million – so long as earnings remain above $3.2 million in the 2015 and 2016 financial years.
Under the deal, Stargate's chief executive, Brett Spencer, will become Rubik’s managing director of mortgages.
The software giant has also entered a binding agreement to acquire another mortgage platform, Infinitive, for an upfront payment of $2.4 million and up to $14.1 million more over the next 18 months, subject to increased revenue.
Stargate and Infinitive handle around 25% of all Australian broker mortgage settlements through cloud-based desktop applications and gateway software – which means Rubik will become Australia’s largest independent supplier of mortgage desktop applications and second largest supplier of mortgage transactional gateway software.
Rubik’s strategy is to own cloud-based platforms with compatible applications and transactional gateways, in order to have a longstanding grip over the market by capturing license fees and transactional revenue.
The company said it has jumped on a “rare opportunity” to acquire both companies in a single move, thus establishing scale, revenues, profits and relationships instantly.
Rubik, which currently services 110 out of 171 Australian ADIs, plans to integrate the mortgage platforms with the company’s existing wealth and banking platforms.
The combination of the two businesses with Rubik’s existing businesses will generate significant “additional synergies” over time and help clients’ productivity – such as the potential to cross-sell to consumers, Rubik said.
Both transactions are fully funded out of cash reserves created by Rubik’s recent over-subscribed $33 million equity raising.
The company expects to pay no more than $4.5 million in one-off transaction and integration costs, largely to integrate the platforms.