Amplitech, a developer of custom and standard state-of-the-art RF components for the Commercial, SATCOM, Space, and Military markets has signed an asset purchase agreement to acquire the business assets of Specialty Microwave Corp. (SMW), a privately held company based in Ronkonkoma NY. The purchase will include all business assets of SMW, including all inventory, orders, customers, fixed assets, and all intellectual property and is contingent upon the simultaneous purchase of SMW’s premises. The assets will also include all eight team members of SMW. The transaction is conditional on completion of satisfactory due diligence and the execution of a purchase agreement on the premises and all related definitive agreements.
Amplitech will acquire Specialty Microwave Corp. for a total of $2.025 Million. The premises of SMW was independently appraised at a value of $1.2 Million in 2014. The consideration for the above will be financed through a combination of cash on hand and promissory notes with a 6% interest rate and no prepayment penalties.
SMW has been in business for over 30 years and makes microwave components, subsystems, and specialized electronics, and provide services to some of the same customers as Amplitech.
SMW operates in adjacent and upstream areas to Amplitech and utilizes their components in some of its subsystems. As they also share some common customers, the transaction should also offer Amplitech the opportunity to move up the value chain with its customers by offering expanded products and solutions at higher average transaction values and margins. The physical proximity of SMW to Amplitech also allows a merger of the production/engineering teams to occur with limited disruption and cost to Amplitech, and Amplitech expects to relocate its operations to SMW’s facilities as soon as its lease expires at 620 Johnson Ave, Bohemia, NY. The combination is also expected to allow Amplitech to utilize both teams to develop new products that could generate additional revenue in the coming years.
Between 2015-2018, SMW generated average annual revenue of approximately $1.75 million in sales and about $290 thousand in operating profit, and Amplitech expects that the acquisition should result in a doubling of its 2018 revenue of $2.4 million on a run rate basis within 2-3 months of closing the acquisition, which is expected to occur at the completion of an audit of SMW’s assets by Amplitech’s auditors, as required by the SEC.
Both companies will be present at the International Microwave Symposium (IMS) in Boston from June 2-7th, and the transaction is expected to close by the end of July 2019.