Two local companies that help smooth the flow of data over the internet also encountered little resistance on the sale of a technology business unit that will instantly make a Gatineau firm a global player in its field.
Kanata’s Martello Technologies and Gatineau’s Adaptiv Networks said Wednesday they have reached an agreement that will see the Quebec-based software networking firm acquire the assets and some liabilities of Martello’s money-losing Elfiq division in a cash-and-share deal.
Under the agreement, Adaptiv will pay $500,000 in cash and the equivalent of $300,000 in common shares to Martello for Elfiq, a Montreal-based entity that makes troubleshooting hardware to repair issues in cloud-based networks.
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The two firms didn’t waste any time coming to terms on the transaction, which still requires the approval of the TSX Venture Exchange. After initially discussing a potential partnership in March, the cross-border neighbours quickly realized an acquisition would make the most sense for both sides.
Adaptiv CEO Bernard Breton is a big fan of Elfiq’s product, which is employed extensively in data centres – a customer vertical the Gatineau firm has failed to meaningfully break into thus far. Besides the product and the highly skilled engineering talent that produces it – 16 former Martello employees from Elfiq’s Montreal office will move over to Adaptiv as part of the deal – Elfiq also gives Adaptiv instant global customer reach.
Elfiq currently does business in 115 countries, generating more than half its revenues outside North America. For Adaptiv – which has 250 customers, but almost none outside Canada and the United States – that represents a whole new world of possibilities for growth.
“It’s really going to allow us to kickstart the international launch of the business at a pace that would have been much slower with no partnerships in place and no customers in place,” Breton says. “It’s a really good fit with us.”
Adaptive, which creates software-defined, cloud-based networks designed to help speed up internet traffic, will now have 63 employees at offices in Gatineau, Mississauga, Montreal and Mumbai.
The company moved the bulk of its R&D and head office operations to Gatineau last year from its previous Mississauga base, largely to take advantage of the depth of telecom talent in the National Capital Region. Last December, it acquired Kanata-based software-defined networking firm LiveQoS and has spent the past several months beefing up its network capabilities.
Ahead of revenue targets
Despite the recent global economic downturn, Breton says Adaptiv is about five per cent ahead of its revenue targets for 2020. The CEO says he’s hopeful the firm will come out of the COVID-19 pandemic “a much stronger player in the marketplace than we were at the beginning of it.”
Martello originally acquired Elfiq in December 2017 in a bid to expand its services and customer base. But the company struggled to gain traction under the Martello umbrella, with the Elfiq division posting a loss of $1.4 million in fiscal 2020 as the pandemic put a huge dent in its earnings.
Martello CEO John Proctor said Elfiq should find a promising home at Adaptiv, which has plenty of defined-networking expertise that marries well with the Montreal company’s products.
“Really for us, it allows us to focus,” he says. “We won’t be in the hardware business anymore, which can be a bit of a distraction.
“We still believe in the technology,” Proctor adds, noting Martello will gain an equity stake in Adaptiv as part of the deal. “We just think it’s better with Adaptiv and their approach on going to market.”
Martello’s shares were unchanged at 20 cents in late-afternoon trading on the TSX Venture Exchange.