KRM22 plc, (AIM: KRM) the technology and software investment company, with a particular focus on risk management in capital markets, today announces it has acquired a 60% stake in Irisium Ltd (“Irisium”), a wholly owned subsidiary of Cinnober Financial Technology AB (“Cinnober”).
London-based Irisium provides a turnkey market surveillance system that provides customised, market-specific alerts, tailored reports, and integrated case management to make trade surveillance efficient and straightforward. In addition to traditional market abuse scenarios, Irisium monitors high frequency trading, abusive trading patterns and entity relationships. The rationale for the investment is to provide an integrated market surveillance system as part of the Company’s regulatory software suite and to leverage Irisium’s existing customer relationships.
Irisium currently has 22 employees, 13 capital markets customers and brings to KRM22 a contracted recurring revenue base of £1.0m with financial institutions, as well as a strong pipeline of prospects. As part of the contract: Cinnober will continue to leverage its sales strength and sell the Irisium offering to its core Exchange market; KRM22 will provide Irisium access to new sales channels to sell to derivatives trading firms and hedge funds; and Irisium will sell directly to all other capital markets sectors.
Under the terms of the transaction, the maximum total consideration for the investment is £2.3m with an initial cash consideration payable to Cinnober of £1.7m for 60% of the share capital of Irisium, financed using KRM22’s existing cash resources. An additional deferred consideration of up to a maximum of £0.6m (the “Deferred Consideration”) is payable in the event that Irisium achieves £2.0m of annualised recurring revenue as at 30 June 2019. The Deferred Consideration can be satisfied in either cash or ordinary shares of the Company at the Company’s discretion. The Company will also be paying Cinnober £0.87m of a £1.4m debt facility provided to Irisium by Cinnober, representing 60% of this debt facility. In addition, KRM22 will provide up to £1.0m to satisfy future funding requirements in order to further develop Irisium’s surveillance product offering. As disclosed in the Company’s Admission Document, Cinnober is a 9.74% shareholder of KRM22.
The Irisium business assets were purchased by Cinnober in May 2017, and revenues invoiced prior to that date were recognised by the previous company. Therefore, for the 8 months from 4 May 2017 to 31 December 2017, Irisium’s revenues were recognised at a lower value (£0.37m) compared to the current contracted recurring revenue base of £1.0m, and the loss before tax was £2.3m for that 8 month period. As at 31 December 2017, Irisium had net liabilities of £2.3m. These net liabilities related principally to the debt facility provided to Irisium by Cinnober in December 2017, which is capitalised as part of the transaction.
This investment is consistent with KRM22’s strategy as it aims to achieve its investment objective through the long term investment in, or acquisition of, private and public companies with a focus on risk in the Capital Markets. KRM22 will take a management leadership role and Keith Todd will join the Board of Irisium as Executive Chairman.
Keith Todd CBE, Executive Chairman and Chief Executive Officer of KRM22 plc commented:
KRM22 was established as an investing company with a long term view to provide a new generation ‘Global Risk Platform’ to deliver significant improvements for our target customers, through our underlying investments, by providing a suite of cost effective risk management tools.
This investment today demonstrates progress since coming to market. Both KRM22 and Irisium share a common view of the emerging surveillance market and by sharing future investment and combining sales strengths in surveillance we will be able to scale up our presence in this important market.”
Veronica Augustsson, CEO of Cinnober Financial Technology, said:
“Today’s announcement is consistent with our ambition when we acquired Irisium to find a strategic partner to accelerate growth and consolidate the surveillance market. We have strong confidence in KRM22 and its senior leadership team who have extensive experience and knowledge in building SaaS (Software as a Service) solutions.”