Tiny (TINY) M&A Announcement summary

Deal rationale and strategic fit

• Acquisition of 66% of Serato, a global DJ software leader, aligns with a strategy to build a diversified portfolio of category-leading technology businesses focused on recurring revenue and profitability.

• Serato brings a strong global brand, a 25-year profitable track record, over 2 million users, and a 35% CAGR in paid subscribers over five years.

• The deal is expected to increase annual recurring revenue by approximately 68% to $64–66 million and enhance the recurring revenue profile.

• Serato's management and founders will remain involved, with incentives aligned to organic growth and long-term value creation.

Financial terms and conditions

• 66% of Serato is being acquired for US$66 million, paid via US$23.6 million in common shares and up to US$42.4 million in cash, with additional contingent consideration up to US$15 million based on performance.

• Serato's run-rate revenue is US$31 million with an Adjusted EBITDA margin of ~34%, and the acquisition values Serato at 3.2x revenue and 9.6x Adjusted EBITDA.

• Pro forma Adjusted EBITDA is expected to increase by ~45% to $42.5–46.5 million, and leverage is expected to be maintained at ~3.1x post-acquisition.

• Net debt is projected to be around CAD 96 million as of December 31, 2024, with ongoing deleveraging efforts.

• Completion shares are subject to a four-month hold and staged release over 24 months; break fee of US$660,000 plus GST applies if the deal is terminated in certain circumstances.

Financial terms of financing

• Cash portion of the purchase price is funded by a $20 million public offering of subscription receipts and up to $32 million private placement of convertible debentures.

• Convertible debentures bear 11% interest, mature in five years, and are convertible at a 30% premium to the offering price.