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US private equity considers $1.5B buyout of GBG as market presents buyer opportunities

Falling pound, limited investor understanding are discounting techs
US private equity considers $1.5B buyout of GBG as market presents buyer opportunities
 

An American private equity fund is looking at a £1.3 billion GBG purchase, according to a statement given to Tech Monitor.

Depending on what happens with the proposed Idemia sale, it could be the year’s biggest acquisition in biometrics and digital ID.

GTCR, an equity fund in Chicago, says there is no guarantee of a price, or even an official offer, but says talks have commenced. The pair will have until Oct. 4 to decide.

GBG employs 1,200 people. In 2021, it posted revenue of £217 million ($250 million) and an operating profit of £58.8 million ($67.7 million).

GBG executives responded to acquisition reports and GTCR’s statement with a generic statement outlining the uncertainty involved. Its shares, traded on London’s AIM market, rallied dramatically from £435 at the close of trading Sept. 1 to £645.50 at Thursday’s close. A year ago, GBG traded closer to £950.

The British pound has declined in value against the U.S. dollar by more than 15 percent over the past year, making the UK an attractive hunting ground for buy-minded U.S. companies.

GBG has already staked a position in the U.S. digital identity market, launching Global Products and the Americas division earlier this year.

Tech Monitor notes the acquisition of Avast and its newfound self-sovereign identity portfolio by U.S.-based NortonLifeLock, an $8.1 billion deal approved this month.

GBG talks follow its high-profile 2021 acquisition in digital identity — Los Angeles-based Acuant. Executives have said that and other moves have helped boost their recent financial results.

Analyst argues Mitek is being discounted

Another digital identity verification leader, Mitek, could be a nice buyout target, according to an article in Forbes.

HooYu’s recent acquisition, the article suggests, may be holding down Mitek’s stock price while providing longer-term upside by enabling a stronger digital identity platform play.

Forbes Special Situation Survey and Forbes Investor newsletters editor Taesik Yoon traces the misunderstanding to the immediate financial impact of the $130 million HooYu acquisition, which should not boost revenue in the short term. This is combined with a lack of understanding from investors who fail to recognize the potential revenue Mitek could wring from integrations with HooYu’s KYC platform.

The platform play makes use of real-time checks against sources like public databases and sanctions lists and combines with Mitek’s biometrics and digital ID verification capabilities to form a complete identity and compliance-assurance system.

Mitek failed to report its Q3 earnings as regularly scheduled, contributing to doubts about its fiscal health. Yoon points out that Mitek’s accountant, Mayer Hoffman McCann, split with the company, leading to the delay. The split appears not to be motivated by conflict or concern on the accounting firm’s part, however, and new auditor BDO USA simply needs more time to complete the paperwork.

Forbes points out that Mitek has beaten the street’s consensus on adjusted earnings for 18 consecutive quarters, and that at the $10.50 price of its stocks as September opened, the company is trading at only 11 times 2022 consensus. Since then, Mitek shares have further fallen to $9.50 in Thursday trading.

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