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Cipherpoint software assets to come under archTIS’ wings

Published: 09:40 20 Sep 2021 AEST

Cipherpoint Ltd - Cipherpoint software assets to come under archTIS’ wings

Cipherpoint Ltd (ASX:CPT)’s technology assets and customer base have found a new owner in fellow ASX-lister archTIS Ltd.

Under a purchase deal, archTIS will absorb parts of Cipherpoint’s software division, including some of the tech stock’s customers, staff, technology and European operations.

The acquisition also carries some important intellectual property, including a data encryption solution and a data discovery and classification platform.

archTIS’ is offering $1.4 million upfront for the Cipherpoint assets — a figure that’s roughly 3.8 times larger than the software division’s annual recurring revenue.

Extending markets in Europe and Singapore

Speaking to the software division acquisition, archTIS Global COO and US president Kurt Mueffelmann said the company had worked with Cipherpoint for some time and the asset purchase was a logical next step in the relationship.

“The bolt-on acquisition represents excellent value for archTIS shareholders (~3.8x current annual recurring revenue) with the delivery of many long-serving, high profile customers and partners, as well as extending markets in Europe and Singapore.

“In particular, the asset purchases will provide archTIS with unique data discovery and classification technology that are complementary to NC Protect and can be cross-utilised with our existing technology stack.

“Moreover, the industry-ready Cipherpoint staff will slot readily into our active EU/America offices and bolster our sales efforts in these markets.”

The fine print

As part of the purchase agreement, archTIS is offering $1.4 million in cash for the Cipherpoint software division assets.

Part of this sum — $200,000 — will be held in escrow until a series of contracts are carried over.

In addition, archTIS will consider paying as much as $1 million more for the software assets depending on the value of contracts assigned to the company up to March 31, 2022.

AR9 will settle this additional consideration by issuing shares under its 15% placement capacity after this date.

Currently, Cipherpoint’s software division generates $370,000 in annual recurring revenue, representing what’s described as a “deep and growing” network of contracts across Europe, Asia and the Americas.

As part of the purchase, CPT staff in Germany will join the AR9 roster — a move the company believes makes the deal immediately financially accretive.

Cipherpoint executive director, joint company secretary and COO Steven Bliim, who will join archTIS as vice president of business development, said: “I am excited about this transaction, especially in its potential to deliver growth opportunities for both businesses in addition to the sales and support systems already well established in archTIS.

“With a number of new pipeline opportunities already underway, I look forward to further cultivating an even stronger working relationship as a member of the archTIS team.”

Absorbing Cipherpoint assets

With parts of the software division now in tow, AR9 also secures the keys to two intellectual property portfolios.

cp.Protect, an advanced SharePoint on-premises data encryption solution, and cp.Discover, a data discovery and classification platform, will come under archTIS’ wing for further development, complementing its existing protection software solutions.

A suite of high-profile banks, universities and media companies already use the cp.Protect and cp.Discover technology.

Notable customers include DHL, Bank of Finland, California State University, Arthur J Gallagher, US DARPA, Singapore Power, Singapore Tote and Acronym Media.

Outside the purchase, Cipherpoint reseller NTT Data will continue to provide an ongoing sales channel for the cp products in Germany, Austria, Switzerland and Singapore regions.

Meanwhile, archTIS’ NC Protect software will provide a migration path for customers moving towards Microsoft’s cloud or hybrid platforms.

Specifically, the acquisition will provide a growing suite of data-centric and zero trust-architecture platforms and products — meaning the technology verifies anything and everything trying to connect to its system — to support Microsoft customer environments.

archTIS managing director and CEO Daniel Lai concluded, “I’m pleased to add the Cipherpoint technology, support and sales teams to archTIS.

“The acquisition clearly demonstrates our fiscal responsibility and our ability to consistently execute on what we have communicated to shareholders and the market around targeting acquisitive growth.

“We are capital-efficient in how we price and evaluate deals and how we’re not afraid to look out of the box for this or other acquisitions.”

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