eResearch | Dye & Durham (TSX: DND), a legal software firm based in Toronto, launched its IPO on July 17 with the shares jumping 97% on the first day of trading. Dye & Durham’s customers include top tier financial institutions and law firms serving customers in Canada and the United Kingdom. The successful launch was the second attempt after delaying the launch in March due to the coronavirus pandemic.
IPO Details
Dye & Durham raised $150 million from issuing 20 million common shares. Offering at $7.50/share, shares immediately began trading at $11.49/share and closed the first day at $14.80
With this successful Canadian technology IPO, optimism has grown that more private Canadian tech firms could soon go public.
The IPO was well received in the investment community and the underwriters exercised their full over-allotment option of an additional 3 million common shares, generating additional gross proceeds to the Company of $22.5 million.
Dye & Durham has over 25,000 clients and an average customer relationship length of 16.6 years. The Company currently operates in Canada and the United Kingdom, with short-term plans to enter into Australia, and longer-term to enter into the US, which offers 4.5x the market size of Canada and the United Kingdom combined.
Figure 1: Dye & Durham Regional Plans
Revenue Guidance
Internal projections for the 2020 fiscal year indicate an increase in revenue of 73.5% from revenue in Fiscal 2019. EBITDA has grown exponentially over the past 3 fiscal years due to new clients, an increase in spending from existing clients, and M&A activities.
CHART 1: Revenue Breakdown and Historical Revenue & EBITDA
Products
Dye & Durham provides a cloud-based software and technology platform for legal and business professionals. The platform offers automated processing of due diligence searches, document creation and records filing. The process expedites daily workflow through automation. As a cloud-based software solution with relatively high fixed costs, any increase in revenue will incrementally increase EBITDA.
Dye & Durham offers services in two streams: Business Law Solutions and Real Estate Law Solutions.
- The Business Law Solution offers an all-in-one solution to provide public records information and legal registries to users. The platform is regularly used for due diligence processing mergers and acquisitions.
- The Real Estate Solution offers clients an efficient process when buying, selling or financing real estate. The software connects participants in the property transfer process. The process assists users in due diligence searches, form creation and facilitates the e-file process of the transaction.
Figure 2: Dye & Durham Product Overview
Product Development and M&A Strategy
A major portion of Dye & Durham’s product development includes M&A to fill product or regional gaps. Dye & Durham follows specific criteria in its acquisition process, targeting firms with two to three times debt to EBITDA ratios, and focuses on immediate synergies in the transactions.
Dye & Durham has completed over eight acquisitions of firms in the industry since 2016 including most recently, buying 100% of Stanley Davis, a cloud-based formations specialist.
“The proceeds from the over-allotment option will be used for working capital and general corporate purposes as the Company continues to seek to acquire, effectively integrate and operate legal technology businesses,” said Matthew Proud, CEO of Dye & Durham.
Figure 3: Dye & Durham Product and M&A Strategy
