H.I.G. Capital's Acquisition of Converge Technology Will Reshape IT Solutions Landscape

H.I.G. Capital's Acquisition of Converge Technology

In a significant development within the IT sector, H.I.G. Capital has announced its acquisition of Converge Technology Solutions Corp. (CTS), a move that is poised to reshape the landscape of IT solutions. This strategic all-cash transaction is aimed at providing immediate liquidity to shareholders while establishing a formidable partnership geared towards executing Converge's long-term growth strategy.

The Deal Overview

According to the terms of the acquisition, shareholders of Converge will receive C$5.50 per share in cash. This offer represents a noteworthy premium of approximately 56% over the closing price and a 57% premium compared to the 30-day volume-weighted average price of the shares on the Toronto Stock Exchange (TSX) as of February 6, 2025. The transaction values Converge at an enterprise value of approximately C$1.3 billion.

This acquisition is particularly remarkable considering that 24% of Converge's outstanding shares already have voting support agreements in favor of this transaction, with the company’s Board of Directors unanimously determining it to be in the best interests of all stakeholders involved.

Strategic Enhancements

Post-acquisition, Converge will align with Mainline Information Systems, LLC, a subsidiary of H.I.G. Capital. Mainline is an established IT solutions provider with expertise in hybrid cloud, cybersecurity, and network security solutions. By combining resources, Converge and Mainline aim to enhance service delivery, offering a broader and more diverse range of IT solutions to their customers.

The combined entity will be spearheaded by Greg Berard, current CEO of Converge, and Jeff Dobbelaere, President and CEO of Mainline. This leadership structure is expected to leverage the strengths of both organizations while optimizing operational synergies.

Comments from Leadership

Aaron Tolson, Managing Director at H.I.G. Capital, expressed enthusiasm about the acquisition, stating, "Converge stands out as an organization that understands where technology trends are going in the IT market and has aligned its business accordingly. Having been a trusted advisor to customers over the years, the combination with Mainline will bring an unmatched breadth of technology and services to our clients."

Greg Berard echoed this sentiment, emphasizing the value for shareholders and the enhanced ability to serve clients. "This partnership lays the groundwork to improve how we deliver IT solutions as industries evolve. Through innovative technology and tailored solutions, we aim to remain a transformative force in the IT sector."

On the other hand, Jeff Dobbelaere commented, "Joining forces with Converge marks the beginning of a new phase in our growth. Our expertise in hybrid cloud and cybersecurity mirrors Converge's strengths, and together, we will create significant growth opportunities benefiting our employees and customers."

Financial Considerations

The acquisition is subject to regulatory and court approvals, as well as the requisite shareholder votes. A special meeting for shareholders is expected to take place in April 2025. If concluded successfully, the combined entity plans to delist shares from public markets and cease to be a reporting issuer under Canadian securities laws.

This transaction, initially approved unanimously by Converge's Board, is a culmination of a thorough negotiation process overseen by a special committee formed expressly for this purpose. Legal and financial advisors advised on the fairness of the deal, ensuring that the terms are favorable to the shareholders.

Future Outlook

As of February 10, 2025, Converge plans to announce its preliminary Q4 FY2024 results, projecting gross profits to fall at the high end of an anticipated range between $165 and $178 million. Such financial indicators should offer further assurance of the company's robust operational capacity ahead of the merger.

In conclusion, H.I.G. Capital's purchase of Converge is not just a financial transaction; it's a strategic alignment that could lead to groundbreaking advancements in IT solutions across various industries, ultimately reshaping the market dynamics for technological services. Investors and stakeholders alike will keenly watch how this merger unfolds in the coming months.