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Tyler's (TYL) NIC Takeover on Track as HSR Waiting Period Ends

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Tyler Technologies’ (TYL - Free Report) proposed deal to acquire NIC Inc. took a step ahead yesterday with an important regulatory approval from the U.S. Federal Trade Commission. The provider of software and technology services to the public sector, Tyler, announced that the waiting period for a review of the transaction under the Hart-Scott-Rodino (HSR) Act has expired on Mar 26.

The HSR Act seeks to ensure due filing of all documents necessary for mergers, acquisitions and transfer of assets or securities by companies with the U.S. Federal Trade Commission and Department of Justice.

The end of the waiting period under the HSR Act satisfies one of the closing conditions of the impending $2.3-billion acquisition, which is likely to close in the second quarter of 2021.

Notably, last month, Tyler announced its plan to acquire payments company, NIC Inc., to bank on the pandemic-induced shift to online services and electronic payments by governments.

Tyler intends to fund the acquisition with a combination of approximately $700 million of cash on its balance sheet and a public offering of $1.6-billion aggregate principal amount of convertible senior notes.

Tyler has a solid balance sheet with ample liquidity position and less debt obligations that provide it flexibility to pursue growth initiatives, including acquisitions. As of Dec 31, 2020, cash and cash equivalents were $603.7 million compared with $519 million as of Sep 30, 2020. Further, cash flow from operations was $88.8 million. Markedly, the company has been able to regularly increase its cash flow from operations in the last five years.

The acquisition is anticipated to be accretive to Tyler’s non-GAAP earnings, EBITDA, recurring revenue mix and free cash flow per share in 2021.

Tyler’s growth trajectory in recent years has been driven by acquisitions. In 2019, the company acquired certain assets of Courthouse Technologies, MicroPact and Civic. The buyouts expanded the company’s footprint into SaaS-based jury-management system, case management and business-process management. MicroPact contributed $63 million to revenues in 2019.

The company is expected to pursue more acquisitions that will be strategically fit to its current offerings. Along with investments on research & development (R&D), acquisitions are likely to strengthen its product offerings and clientele over the long run.

Zacks Rank & Stocks to Consider

Tyler currently carries a Zacks Rank #5 (Strong Sell).

A few better-ranked stocks in the broader technology sector are Skyworks Solutions (SWKS - Free Report) and Etsy, Inc. (ETSY - Free Report) , each sporting a Zacks Rank #1 (Strong Buy), at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The long-term earnings growth rate for Skyworks Solutions and Etsy is currently pegged at 18.98% and 25.25%, respectively.

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