Catcha’s big M&A bet

FOR a company with only RM5mil in its coffers, it’s certainly surprising that Catcha Digital Bhd is embarking on acquisitions that total some RM130mil.

In the past six months, Catcha Digital has announced six acquisitions totalling RM130.37mil, involving companies in digital advertising and media, as well as in the software industry.

So, how will it pay such a huge bill?

Funding is being raised via a rights issue and a private placement.

Not all shareholders are impressed – Catcha Digital’s share price has dropped 22% year-to-date, and is down 6% in the past month alone.

Could it have done better by using its shares to pay for the acquisitions – one of the main reasons companies go public in the first place?

On a positive note, all the acquisitions come with profit guarantees.

Sellers also have to meet certain milestones before they get their buyout payments, which means that the total RM130mil that Catcha Digital needs to spend is staggered over time.

Still, the key question remains: what will the financial returns be – in other words, are these investments justified?

Catcha Digital is focused on becoming the leading digital group in Asean.

Its acquisitive strategy reflects that ambition, aiming to consolidate the highly fragmented digital media industry.

The idea is to become an efficient one-stop digital media solutions provider, offering advertisers better value.

But competition in the sector is fierce and it’s an industry largely driven by talent.

Could it have been easier and more cost-effective to hire the right talent and build these capabilities in-house, rather than write hefty cheques for acquisitions?