Australian HR software business Elmo has acquired Breathe, a leading UK-based HR platform for small business with over 6700 customers.
According to an investor presentation, the deal increases the total addressable market for Elmo by over $2 billion to $11.4 billion across Australia, the UK and NZ by allowing Elmo to extend both its geographical reach, and also by enabling it to dive deeper into the SME marketplace.
According to Elmo Chief Commercial Officer Darryl Garber, “The reason why this is such an exciting opportunity for Elmo is that it’s a new market that we do not operate in — small businesses with 50 employees or less.
“The platform is fit for purpose for these small business customers who prefer a customer-led, self-service solution. That means that the customer is able to self-try, self-buy, and self-implement without the need for external salespeople or implementation consultants.”
That is also important for Elmo as it means the business is highly scalable, with great unit economics, he said.
The deal aligned with all three pillars of the company’s acquisition mandate, said Garber. “It provides us with a complementary technology — a small business platform to cater to the needs of small business customers. It provides us with a substantial customer list with 6700 customers in the UK, and it also expands our UK footprint.”
Breathe, with 46 staff, is a Cloud-based platform founded in 2012, meaning Elmo will be spared the usual pain of transitioning clients off on-premise technology. And with 100 per cent subscription-based revenues it is also spared the pain of transitioning customers to a new business model.
Breathe is growing at over 30 per cent, and currently claims to have an 85 per cent customer retention rate.
Elmo is one of the more acquisitive Australian technology businesses on the ASX, with Breathe representing its eighth such transaction since it picked up Techniworks in October 2016.
Other deals included such companies as Peoplepulse, Pivot and earlier this year, Vocam.