AVADA Group completes acquisition of STA Traffic Management

Australia’s leading traffic management operator, AVADA Group Limited (ASX: AVD), has finalized its acquisition of STA Traffic Management. This marks a pivotal moment for AVADA as they continue their expansion journey across Australia and New Zealand.

Highlights of the Acquisition:

• Significant Market Expansion in Victoria: With the addition of STA Traffic Management, AVADA now boasts 31 depots and oversees more than 2,400 traffic controllers spanning Australia and New Zealand.
• Financial Details of the Deal: STA Traffic Management’s unaudited EBITDA for FY23 stood at A$2.8 million. The acquisition, with a consideration of A$8.5 million, resonates with a 3.0 times multiple of the normalized EBITDA.
• Funding Methodology: The acquisition was majorly financed through a recently finalized two-tranche institutional placement, raising approximately $7 million at $0.60 per share. Approval for the issuance of shares in the second tranche was given during the extraordinary general meeting held on 4 October 2023.
• STA’s Credibility in Victoria: Recognized as one of the top five traffic management entities in Victoria, STA Traffic Management complements AVADA’s operations in the region with its sustainable earnings and a diversified clientele.
• Post-acquisition Strategy: To harness maximum value from this acquisition, an integration plan has been set in motion.

This acquisition aligns with AVADA’s proactive strategy to bolster its position as a premier traffic management operator in the region. Furthermore, by acquiring STA Traffic Management, AVADA diversifies its client base, as the former primarily tends to corporate clients in the infrastructure and utilities sectors in Victoria. The union promises significant synergies, including optimal resource allocation and refined back-office operations.

Integration & Future Aspirations:

Learning from past acquisition experiences, AVADA has crafted a meticulous integration approach. A veteran General Manager from AVADA’s ranks has been tasked to lead STA Traffic Management post-settlement, ensuring the amalgamation of “The AVADA way” with STA’s established modus operandi.

Established in 2009 by Jean Paul Cellier, STA Traffic Management has grown exponentially, today managing a fleet of 86 traffic management vehicles and employing over 250 traffic controllers. Located in Yarraville, Melbourne, STA’s revenue primarily stems from aiding its corporate clients with infrastructure maintenance and civil construction ventures.

Commenting on the acquisition, Daniel Crowley, AVADA Group Chief Executive Officer and Managing Director, stated, “The completion of STA represents another important milestone in the delivery of the Group’s strategic objectives. We aim to maximize value through this acquisition for our shareholders.”

Funding Insights:

The A$8.5 million acquisition consideration corresponds to a multiple of 3.0 times FY23’s unaudited EBITDA of A$2.8 million. Funding for the acquisition comes partly from AVADA’s recent institutional placement of approximately A$7 million, with the balance sourced from AVADA’s cash reserves.