Codan has dropped a quarter of billion dollars on a new acquisition

Codan Ltd (ASX: CDA) has made an acquisition in the US which will help build out the product suite of its lesser known Zetron division.

The technology company's shares are up slightly more than 60% over the past 12 months largely on the back of strong trading from its military communications and metal detection divisions.

But Codan has just announced on 9 November it will pay $244 million mostly in cash to buy a company called Eventide, which provides "mission critical" recording and analytics solutions.

Technology a good fit with Codan's product

The company's recorders are widely used to record 911 emergency calls in the US Codan said, with other sectors such as defence and utilities also using the technology.

Codan went on to say:

Eventide's technology records and securely stores calls, video, radio and screen activity in emergency call centres and operational control rooms, capturing how calls and data are handled and responders are dispatched. Customers can quickly search, replay and export these records to investigate incidents, provide evidence for legal proceedings, and assess and improve staff performance. The Eventide technology suite is a fundamental component of 911 emergency call centre requirements and can be fully integrated into and be interoperable with other mission-critical modules, including call taking, alerting and dispatch.

Codan said Eventide released a cloud-based extension of its technology in 2025 called Critical Insights AI, which automated quality assurance, operational intelligence and data analytics.

The company said Eventide's technology would extend Zetron's capabilities from call taking and dispatch into recording, replay, compliance and investigation.

Codan added that it believed it could extend Eventide's offerings further into defence, where it has a strong foothold.

As it said:

By leveraging Zetron's global presence and distribution network, Codan believes it will be able to expedite Eventide's geographic expansion outside of its core market presence within the US and further broaden its customer reach into defence-related verticals. Eventide has invested significantly in its product, engineering, support and operational capabilities over the past three years, which Codan and Zetron will continue to support. This investment is expected to deliver a margin uplift over the medium term and enhance Codan's exposure to non-conflict revenue streams.

Eventide generating strong earnings

Codan will pay mostly cash for the acquisition, plus $11 million worth of Codan shares paid to Eventide's managing director over three years.

Eventide was expected to generate $49 million in revenue this calendar year and EBITDA of about $17 million.

Codan Managing Director Alf Ianniello said his company had been an Eventide reseller for more than 10 years, so they knew the company well.

Codan shares were 0.5% lower at $54.21 on Monday morning.

Foolish takeaway

Diversifying Codan's revenues away from defence is a smart move and doing it while the company is in a strong position is timely.

The synergies between the businesses appear clear and the deal has the potential to boost Zetron into a strong revenue driver for Codan.  

UBS, in a broker note issued on 1 October, has a price target of $68.50 on Codan shares. Canaccord Genuity is also bullish on Codan shares.

The post Codan has dropped a quarter of billion dollars on a new acquisition appeared first on The Motley Fool Australia.

Motley Fool contributor Cameron England has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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