With its planned acquisition of Orga Systems from the German equivalent of Chapter 11 bankruptcy protection for €38 million, Redknee will gain what its chief executive, Lucas Skoczkowski, describes as a “great customer base”.
That involves communications service providers (CSPs) in Europe and Latin America but, perhaps more attractively, a handful of customers in industries outside of telecoms. Orga Systems had been supplying systems and working with companies such as BMW and utility providers.
“Besides telecoms, Orga has done a lot in non-telecoms that we want to build on,” he says. “We want to put more effort behind that.”
Whilst Skoczkowski acknowledges there is product overlap, he expects to be able to add to the combined companies’ product base and continue to support Orga Systems customers profitably.
The deal, should it go through, sees two companies that are quite familiar with each other coming together. Skoczkowski says he and Wolfgang Kroh, the chief executive of Orga Systems, who was brought in to try and rescue the company, had been in discussions in the past about the challenges the vendor sector faces in achieving scale.
“Consolidation and the need to gain scale is real in our space,” says Skoczkowski. “I’ve had discussions with Wolfgang in the past.”
Skoczkowski certainly has respect for Kroh, emphasising that much of the work required to return Orga Systems to a sound footing has already been undertaken. During the negotiation process, Redknee was keen to ensure Kroh and Orga Systems CTO Dr Ralf Guckert will stay on in the combined company. He says Kroh’s experience will be particularly useful if Redknee makes further acquisitions as the industry consolidates.
“Wolfgang has done a great job of putting the company on the path to profitability,” says Skoczkowski. “He did a lot of work last year.”
Kroh, of course, is no newcomer having successfully led LHS before selling it to Ericsson last decade.
However, it’s not just the c-suite that Redknee wants to bring on board post acquisition. Skoczkowski says all Orga Systems personnel employed when the deal closes will be retained. Subject to German labour laws, that may see a limited number of job losses.
“All employees at closure [of the deal] will be kept with us,” confirms Skoczkowski. “We need them in Europe and globally to serve our customers. We need them where they are to support the business. In Germany, there may be a bit of overlap but the process the company has already gone through means it is about the right size [in terms of headcount].”
The combined companies will have more than 400 employees in Germany.
Skoczkowski believes a fair price will be paid for Orga Systems at €38 million. “The price isn’t cheap, it’s fair,” he says. “At the price, we can make the business profitable. For our shareholders it’s a good deal. We’re buying the whole business including accounts receivable.”
Part of that path to profitability will be Orga Systems transferring to Redknee with a clean balance sheet, unencumbered by debt. “I see the deal as accretive for us,” concludes Skoczkowksi. “We’ll be able to make money on a combined basis thanks to the work Wolfgang has done since he joined Orga Systems.”
