Sciquest Makes A Risky Acquisition

Sciquest (NASDAQ: SQI), provider of cloud services for business automation, yesterday announced its acquisition of Combinet Inc. a leading provider of procurement software solutions. Sciquest, currently having a market cap of $458 million, will pay the shareholders of Combinet $26 million in cash and issue 820,000 common stock to acquire a 100% stake in Combinet Inc. Considering the current market price of Sciquest, the total value of the acquisition is around $43 million. The addition of Combinet’s procurement tool expands Sciquest’s footprint in the cloud based services space.  According to the official statement, Combinet currently has over 100 customers around the world across various industries like manufacturing, retail and restaurant industries. Although the deal will expand the service portfolio of Sciquest it will also make a big hole in the company’s cash balance, which stood at $46.41 million as of June end. The deal assumes further risk considering that the firm generated a meagre $2.94 million cash from operations over the last two quarters. The firm’s low cash balances and its relatively small cash flows may be one reason the acquisition could lead to a bearish response from the market. This would be a stock to watch once markets open on Wednesday.

To see Sciquest’s latest stock price movement, click here (NASDAQ: SQI)

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Neither Amigobulls, nor any members of its staff hold positions in any of the stocks discussed in this post. The author may not be a certified/registered investment advisor, and the opinions expressed should not be treated as investment advice. Buying and selling of securities carries the risk of monetary losses. Readers/Viewers are advised to carry out their own due diligence and consult their investment advisors before making any investment decisions. Neither Amigobulls, nor the author have any business relationship with any of the companies covered in this post.

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