Tyler Technologies, Inc. (NYSE: TYL) announced it has signed a definitive agreement to acquire privately held New World Systems Corporation for $670 million in cash and stock. New World Systems, a leading provider of public safety and financial solutions for local governments, will bring an important element to Tyler’s portfolio of solutions.
Founded in 1981 by president and CEO Larry D. Leinweber, the Troy, Michigan-based company has more than 2,000 public sector customers and more than 470 employees. The companies are highly complementary, and combining them supports Tyler’s strategy of being an industry leader in all major enterprise applications essential to local government.
New World Systems’ principal products are AEGIS, a comprehensive public safety suite for dispatch centers, police officers, firefighters, paramedics, corrections officers, command staff, and all first responders, and LOGOS, a suite of public administration software that meets the accounting needs of city and county governments. Public safety represents approximately 67 percent of New World Systems’ revenues.
Under the terms of the agreement, Tyler will acquire all of the equity in New World Systems for $360 million in cash and approximately 2.1 million shares of Tyler’s common stock, representing approximately 5.9 percent of Tyler’s outstanding common shares post transaction, subject to customary post-closing adjustments. The cash portion of the purchase price will be funded from cash on hand and proceeds from a new revolving credit facility.
The transaction is expected to close in the fourth quarter of 2015 and is subject to regulatory approval and customary closing conditions. Leinweber will join Tyler’s board of directors upon the closing of the transaction.
This transaction is expected to be immediately accretive to non-GAAP earnings per diluted share, with an expected impact to non-GAAP revenues of approximately $134 million, to adjusted EBITDA of approximately $49 million, and to non-GAAP earnings per diluted share of approximately $0.56 for the year ending December 31, 2016. These estimates are non-GAAP measures that reflect certain adjustments Tyler makes to provide insight into operating results. A description of those adjustments is provided below.
“This is a complementary and extremely comfortable acquisition for Tyler," said John S. Marr Jr., Tyler’s president and CEO. "The companies serve related addressable markets, our cultures are very compatible, and we have similar financial and operational philosophies. This transaction demonstrates Tyler’s commitment to creating shareholder value by putting our assets to work with the acquisition of a company that’s already performing well financially and operationally in segments of the public sector market that are strategically important to us. We’re excited about creating value without straying from our core competencies, which lets us avoid the risks that others assume by attempting transformative acquisitions."
Marr continued to say: “Acquiring New World Systems is a highly strategic and growth-oriented decision, and we plan to invest in their products and find new opportunities both in our combined client bases and in markets where they currently are most competitive. We will also explore growth opportunities from offering enhanced services such as software as a service (SaaS), disaster recovery services and other existing Tyler products to New World Systems’ installed customer base.”
Tyler plans to integrate its Odyssey courts and justice solution with the AEGIS public safety platform to create a unique end-to-end enterprise criminal justice solution.
“Odyssey is already a clear leader in courts and justice software, and we’re seeing very solid growth from our e-filing solution," Marr said. "By adding a market leading public safety offering to Tyler’s portfolio of courts and justice solutions, we can deliver a comprehensive enterprise criminal justice system that does not exist in the market today. We believe it’s important for the judicial and public safety communities to understand the incremental value they gain from having a leading courts and justice system and a leading public safety solution in one offering. We believe that our combined offering will create a unique opportunity for communities at the local, county and statewide levels.”
While New World Systems is Tyler’s largest acquisition to date, Tyler has a long and successful track record of creating value through inorganic growth. There are no plans to materially impact either company’s workforce, and New World Systems’ headquarters in Michigan is expected to continue to operate virtually unchanged.
“I certainly see this transaction as an opportunity for New World Systems employees and clients to benefit from the kind of investments and vision that Tyler Technologies brings to bear,” said Larry D. Leinweber, founder, president and CEO of New World Systems. “Both companies operate and have grown in a very responsible manner, our products are strong, we deliver good financial results and have high client retention. Tyler and New World Systems are complementary in so many ways that it’s hard to see anything but tremendous opportunity for employees, clients and investors alike.”
Wells Fargo Securities, LLC, acted as financial advisor to Tyler Technologies for this transaction.
About Tyler Technologies, Inc.
Tyler Technologies (NYSE: TYL) is a leading provider of end-to-end information management solutions and services for local governments. Tyler partners with clients to empower the public sector — cities, counties, schools and other government entities — to become more efficient, more accessible and more responsive to the needs of citizens. Tyler’s client base includes more than 13,000 local government offices in all 50 states, Canada, the Caribbean, the United Kingdom and other international locations. Forbes has named Tyler one of “America’s Best Small Companies” eight times and the company has been included six times on the Barron’s 400 Index, a measure of the most promising companies in America. More information about Plano-based Tyler Technologies can be found at www.tylertech.com.