AB Dynamics acquires Michigan-based VTS
By Josh White
Date: Wednesday 03 Apr 2024
(Sharecast News) - AB Dynamics announced the completed acquisition of Venshure Test Services (VTS) on Wednesday, marking a significant expansion of its testing capabilities, particularly in the United States.
The AIM-traded firm said VTS specialises in dynamometer-based testing services tailored for the automotive sector, with a strong focus on the development and deployment of electric vehicles (EV) for US-based automotive original equipment manufacturers (OEMs).
Based in Chelsea, Michigan, VTS operates a 23,300 square foot testing facility strategically positioned near the Detroit area.
The facility is equipped with dynamometers and EV vehicle testing laboratories, facilitating comprehensive testing services including mileage accumulation and assessment of EV powertrain and battery performance under extreme climatic conditions.
VTS adheres to standardised procedures for validating EV battery energy consumption and range testing, ensuring the production of SAE J1634 quality data.
The board said the acquisition aligned with AB's strategic objectives in a number of key areas, including that it would further align the group's testing services operations with the structural growth drivers in the automotive sector.
It would also expand the group's capabilities and diversifies the scope of services within the testing services segment, and complement the group's existing California-based track testing services business by introducing laboratory-based testing.
AB Dynamics said it would also present opportunities for replicating testing services capabilities across multiple locations.
Financially, the maximum consideration payable for VTS would amount to $30m (£23.6m), with an initial cash consideration of $15m.
The acquisition, completed on a cash-free, debt-free basis, was financed through the group's existing cash resources and short-term use of part of its revolving credit facility.
Additionally, contingent consideration of up to $15m would be payable in cash over two tranches during the two years following completion, subject to meeting specified performance criteria.
VTS had a strong track record of profitable growth and cash generation, AB Dynamics said, reporting that for the year ended 31 December, VTS generated unaudited revenue of $3.5m, up from $2.4m year-on-year, with EBITDA rising to $1.9m from $1.2m and adjusted operating profit reaching $1.5m from $0.8m.
Unaudited net assets as of 31 March totalled around $5m.
The board said it expected the acquisition to be earnings enhancing in the 2024 financial year, with forecast revenues for the five-month period amounting to $1.8m and adjusted operating profit of around $0.7m.
VTS was acquired from its two shareholders, Gerard Glinsky and David Ploucha, both of whom would continue their involvement in the business to ensure the delivery of growth expectations.
"I am very pleased to announce the acquisition of VTS and the expansion of the group's testing services provision in the US," said chief executive officer Dr James Routh.
"The acquisition expands both our capability and geographic coverage in the important and growing field of EV battery and powertrain performance evaluation.
"Customer focus on electric vehicle and battery technology is a long-term trend that will support continued growth at AB Dynamics as competition increases and new vehicle models require additional development work, testing and validation."
Dr Routh said VTS had a "first-class reputation" for providing vehicle testing services to its OEM customer base, with AB Dynamics "looking forward" to leveraging its sales capabilities to drive cross-selling and expand this further.
"We expect the acquisition to provide us with an excellent platform for further growth and we are delighted to welcome the VTS team to AB Dynamics."
AB Dynamics said it would report its interim results for the six months ended 29 February on 23 April.
At 1132 BST, shares in AB Dynamics were up 2.37% at 1,730p.
Reporting by Josh White for Sharecast.com.
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