On Monday, IT services provider Roper Technologies Inc. announced it would purchase PowerPlan for $1.1 billion from the private equity firm, Thoma Bravo. In fact, this is the second time Roper forged a billion-dollar deal with Thoma Bravo. Back in 2016, Roper Technologies Inc purchased the software firm Deltek for $2.8 billion.
Also, in 2015, Thoma Bravo bought PowerPlan from investors JMI Equity and TPG Growth. The purchase price was undisclosed. PowerPlan offers regulatory, tax, and budgeting strategies for businesses. How did Roper fund their current deal? With both cash and existing credit.
Roper hopes PowerPlan will generate around $150 million of revenue the first year and $60 million for after-tax cash flow. Upon regulatory approval, Florida-based Roper expects the transaction to close in the second quarter.
Recently, investment analysts have claimed Roper Technologies Inc. (NYSE:ROP) risk is priced pretty low. For example, the annual high for Roper Technologies Inc. IV30 is 32.16%. Yet, the option market is reflecting a risk malaise of 18.62% compared to 11.16%. And, ROP is at the 28% percentile currently. This gives ROP a risk rating of 1, where 5 is the highest. Simply because the stock has only moved -0.5% over the past three months. This acquisition may continue the risk malaise. Time will tell.
The question is: Could ROP outperform within its industry? If you use the past 12-month data, to annualize the earnings update, then you'll notice Roper's earnings of $1.02B is 54.06% higher than the same time last year.
If you then look at an annualized five-year figure for ROP's net income, it would be around $608.18M. As a whole, Roper has been able increase its earnings annually. When you add that to the PowerPlan expectations of a $60 million after-tax cash flow, the future seems bright. It also wouldn’t be far-fetched to consider that ROP will outperform within its industry.