The Audinate Group Ltd (ASX: AD8) share price is falling on Monday morning.
At the time of writing, the media networking solution provider’s shares are down 3.5% to $10.11.
Why is the Audinate share price falling?
The Audinate share price is falling on Monday despite announcing a new acquisition. This may be due to broad weakness in the tech sector this morning.
According to the release, Audinate has signed an agreement to acquire the video business of Belgium-based Silex Insight for an up-front cash payment of US$6.5 million. This represents approximately 2.3 times forecast revenue for the financial year ending 31 December 2021.
A revenue earn-out of up to US$1.5 million may also be payable based on the uplift in revenue for the twelve-month period from acquisition date.
The company notes that the Silex video business produces video networking products for manufacturers of audio-visual (AV) equipment. The products include IP Cores, Viper Board, Video ASSP, and three video compression technologies.
Management believes it is a strategically compelling acquisition because it complements Audinate’s existing video capabilities in Cambridge, UK. Furthermore, it aligns with the company’s strategic vision for video over IP. In particular, the transaction will increase video FPGA expertise, enable acceleration of the video product roadmap, and cement critical mass for video engineering in Europe.
Audinate’s Co-Founder and CEO, Aidan Williams, was very positive on the acquisition.
He commented: “We are very excited to acquire a team with widely recognised video hardware expertise and an existing revenue base. The video codecs and deep product expertise in the team, in combination with our Dante networking technology, will enable us to go to market with a variety of full-service video offerings.”
“This acquisition complements the video software skills in the Cambridge (UK) team we established earlier in the year. Together these two deals significantly enhance our video capabilities and know-how – outcomes that have been achieved in only twelve months, notwithstanding the challenges presented by COVID,” Williams added.
The proposed transaction is expected to complete on 31 January 2022, subject to the achievement of conditions precedent standard for this type of transaction.
The post Audinate (ASX:AD8) share price tumbles despite announcing acquisition appeared first on The Motley Fool Australia.
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