12 September 2022

ARTHOS advises Eurotech S.p.A. on its acquisition of InoNet Computer GmbH

Extending Eurotech’s footprint in Germany and accelerating its growth strategy in the Edge Computing market in AIoT
Eurotech S.p.A. (“Eurotech”), a leading provider of Edge Computing solutions for mission critical applications, has acquired the entire share capital of InoNet Computer GmbH (“InoNet”), a German company based in Taufkirchen (south of Munich), operating in the sectors of Industrial PCs (IPCs) and embedded systems for special applications.

ARTHOS acted as the exclusive M&A adviser to Eurotech, providing full buy-side advisory services. This included analysing and approaching potential strategic partners together with AICA partner firms in Europe and the US, as well as, after agreeing on major terms, driving the subsequent M&A process including the coordination of the due diligence and contract negotiations.

The Enterprise Value of the target amounts to Euro 10 million, on the basis of which a cash consideration of Euro 9.45 million has been determined; there is also an earn-out of up to a maximum of 300,000 Eurotech shares, to be paid depending on the achievement until the year 2024 of specific targets for organic growth, implementation of synergies and retention of identified key figures. The aforementioned cash amount of the acquisition consideration was paid in full using the Eurotech Group’s cash and cash equivalents.

Founded in 1998, InoNet is an established and recognized player in the DACH market, where it supplies custom and configured systems to renowned customers in the medical, industrial, and automotive sectors. For fiscal year 2022, ending March 31, 2023, InoNet expects revenues of €17.5 million (€15.2 million in fiscal year 2021) and EBITDA of €0.7 million (€0.4 million in fiscal year 2021), calculated according to German GAAP. This corresponds, according to IFRS used by Eurotech and based on preliminary estimates, to approximately €0.8 – 0.85 million.

The implied multiple of the transaction is 0.6x with respect to sales and 14.3x with respect to EBITDA (11.8x – 12.5x with respect to EBITDA calculated according to IFRS).

Eurotech expects to be able to bring InoNet’s EBITDA margin into double digits within the next two and a half years. Eurotech has identified, on the one hand, cost synergies on the supply chain and, on the other hand, growth synergies related to cross-selling actions, both to InoNet’s existing customers and to new customers in the DACH area.

Strategic rationale

1. Expansion into the second largest market for Industrial IoT
The addition of InoNet gives Eurotech relevance and critical mass in Germany, and creates an important access to the DACH market, which is the world’s second largest market for industrial IoT after the United States.

2. High complementarity
InoNet shares with Eurotech the same focus on critical applications, high-quality products, and high value-added solutions. In addition to this affinity, the two companies have a strong complementarity of products, markets, and channels.

3. Accelerating growth in the emerging Edge AI sector
InoNet represents a solid platform for Eurotech to accelerate in the emerging global Edge AI market, growing over 30% YoY, starting from Industrial PCs type of products. In addition, integration with Eurotech’s Edge SW and cybersecurity certifications will enable important differentiation and accelerate the journey towards being a leading provider of integrated devices for Edge AIoT applications.

Finally, InoNet’s portfolio of customers in the midcaps of the DACH region provides the basis for up-selling opportunities of Eurotech’s Edge SW (ESF and EC).

Paul Chawla, CEO of Eurotech, said: “I’m happy to welcome InoNet to the Eurotech family. InoNet allows us to have a direct presence in Germany, which has been a white space so far in our footprint. We share similar DNAs when it comes to helping customers solve challenging problems. The complementarity of our offerings will help us scale in DACH, the second fastest growing IoT market in the world, with strong differentiation in cybersecurity linked to integrated HW & SW solutions.”

Michael Schmohl, founder of InoNet, said, “25 years after founding InoNet Computer GmbH, I am excited to hand over the company to an Industrial IoT player that fits so perfectly with our corporate culture and our customers.”

Ioannis Armenis and Ralph Ostertag, Managing Directors and co-owners of InoNet, added, “We are all thrilled by the opportunity to create a leading provider of Edge AI devices. With InoNet’s presence in DACH and Eurotech’s presence in the Americas, UK and Asia, the two companies truly complement each other. We look forward to building on our companies’ consistent commitment to innovation and customer service.”

About Eurotech
Eurotech (ETH:IM) is a multinational company that designs, develops and delivers Edge Computers and Internet of Things (IoT) solutions complete with services, software and hardware to system integrators and enterprises. By adopting Eurotech's solutions, customers have access to components and software platforms for IoT, Edge Gateways to enable asset monitoring, and high-performance Edge Computer for applications including Artificial Intelligence (Edge AI). To offer more and more complete solutions Eurotech has activated partnerships with leading companies in their field of action, thus creating a global ecosystem that allows it to create "best in class" solutions for the Industrial Internet of Things.

About InoNet Computer
InoNet is a German company that operates in the sectors of Industrial PCs (IPCs) and embedded systems for special applications. Founded in 1998, InoNet is an established and recognized player in the DACH market, where it supplies custom and configured systems to renowned customers in the medical, industrial, and automotive sectors.

ARTHOS is an independent M&A advisory firm and specialist for digital media, IT and high-tech industries based in Munich. Since 2003, ARTHOS services customers on the buy- and sell-side regarding the acquisition or disposal of companies and business units worldwide. The partners of ARTHOS so far have successfully closed over 200 M&A transactions. ARTHOS is member of the German Association for Mergers & Acquisitions e.V. (BM&A) and AICA – the global Alliance of International Corporate Advisers.