Converge Technology Solutions Corp. Acquires VSS, LLC

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VSS, LLC is a leading Technology Solutions Provider in the Northeast US, focused on Managed Services, Technology Solutions, IT Portfolio Management, and Consulting Services.

TORONTO, Nov. 18, 2019 /CNW/ - Converge Technology Solutions Corp. ("Converge" or "the Company") (TSXV:CTS) (FSE:0ZB) (OTCQX:CTSDF) announced today that it has acquired all of the voting and economic membership interests of VSS Holdings, LLC ("VSS") a Northeast based partner focused on managed services, technology solutions, IT portfolio management, and consulting services. VSS brings its customers and highly skilled teams comprised of experienced technology experts, business consultants, and industry thought leaders to Converge's fast growing platform.

VSS generated gross invoiced revenues of approximately US$80 million including approximately US$14 million of services revenue, gross profit of approximately US$19 million and Adjusted EBITDA of approximately US$5.7 million for the trailing 12 months ended September 30, 2019. Consideration for the purchase consisted of (i) US$15.5 million in cash; (ii) promissory notes in the total amount of US$1.5 million in favor of the sellers; (iii) up to an aggregate of US$10 million in earn-out payments for the three years following closing of the acquisition based on the achievement of certain milestones; plus (iv) the issuance of a right to the sellers to exchange the remaining 10%  membership interests constituted solely of Class B membership units in VSS held by the sellers (the "Retained Interests") which have no right to any economic or voting participation in VSS, for an aggregate of approximately 2.93 million common shares of Converge (the "Exchange Right"), subject to certain conditions. The cash portion of the purchase price was financed by Converge's credit facilities. The acquisition is expected to be immediately accretive to Converge, resulting in increased earnings and adjusted EBITDA.

No sale of shares acquired under the Exchange Right will be permitted until at least six months from the acquisition of VSS, an additional one-quarter of the shares acquired under the Exchange Right will become eligible for sale on each six-month anniversary of the completion of the transaction thereafter, such that all Retained Interests under the Exchange Right of approximately 2.93 million Converge common shares will be available for sale following the two-year anniversary of the acquisition. Once all of the Retained Interests have been exchanged pursuant to the Exchange Right, Converge will hold all of the membership interests in VSS.  The Exchange Right will allow the sellers to receive the equity component of the consideration for the acquisition of VSS on a tax-deferred basis, while giving Converge full control of, and economic interest in, VSS immediately.

VSS CEO, Robert L. Jernoske, Jr., will continue in his role along with the existing VSS management team. Working with VSS, Converge will look to introduce its Software Enabled Hybrid IT solutions including identity-based cognitive, cybersecurity, resiliency managed services, multi-cloud solutions, and enterprise Blockchain to existing and new VSS customers while leveraging VSS specializations ranging from virtualization, cybersecurity, power systems, managed services, and end-to-end data center solutions and services to Converge clients across North America. 

Since 1990, VSS has been helping clients transform their business using people, process, and technology. After nearly three decades, VSS has successfully developed a culture that is passionate about technology solutions and services. VSS aims to deliver its customers sustainable technologies implemented by its team of experts to drive business results and deliver on promises to clients and industry partners.

"VSS is now poised to deliver a more widely-based platform of services to its customers while still offering its top-of-the-line customer service and white glove treatment to ensure that their business objectives are met or exceeded," said Robert L. Jernoske, Jr., CEO of VSS. "We are excited to add Converge's platform of offerings to new and existing customers."

"We look forward to VSS joining the Converge family of companies," said Shaun Maine, CEO of Converge. "VSS's sales strength in the financial services industry greatly enhances our capabilities in becoming a dominant software-enabled Hybrid IT provider in the New York and Mid-Atlantic marketplace as it builds on the platform we have created there with our previous acquisitions, Essex Technology Group and Lighthouse Computer Services. VSS also brings a level of expertise around managed services that will allow us to continue to drive value with our Converge private cloud offerings to our clients."

VSS marks the eleventh acquisition completed by Converge since October 2017. Converge's family of companies also includes Corus Group, LLC; Northern Micro, Inc.; 10084182 Canada Inc. operating as Becker-Carroll; Key Information Systems, Inc.; BlueChip Tek, Inc.; Lighthouse Computer Systems, Inc.; Software Information Systems LLC.; Nordisk Systems, Inc.; Essex Technology Group, Inc.; and Datatrend Technologies, Inc.

About Converge
Converge Technology Solutions Corp. combines innovation accelerators and foundational infrastructure solutions to deliver best-of-breed solutions and services to customers. The Company is building a platform of regionally-focused Hybrid IT solutions providers to enhance their ability to provide multi-cloud solutions, blockchain, resiliency, and managed services, enabling Converge to address the business and IT issues that public and private-sector organizations face today. For more information, visit http://www.convergetp.com.

About VSS, LLC
As a technology solutions provider, VSS LLC makes it their mission to understand their customers' current needs, as well as future goals. Through that understanding, their distinguished engineering team is able to architect visionary infrastructure which solves both the immediate needs, and future business initiatives of their customers. For more information, visit http://thinkvss.com.

Notice to Reader:  Use of Non-IFRS Financial Measures and Forward-Looking Statements

1. Non-IFRS Financial Measures
   In this news release, certain non-IFRS measures to evaluate performance are used.  The term "Adjusted EBITDA" does not have any standardized meaning prescribed within IFRS and therefore may not be comparable to similar measures presented by other companies.  Such measures should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS such as net income.  Adjusted EBITDA is defined as gross profit less selling, general and administrative expenses, and corresponds to income before income tax, depreciation and amortization, finance expenses, change in fair value of contingent consideration, transaction costs for acquisitions and other non-operating expenses.
   
   
   Management believes Adjusted EBITDA is an important indicator as it excludes certain items that are non-cash expenses, items that cannot be influenced by management in the short term and items that do not impact core operating performance, demonstrating VSS' ability to generate liquidity through operating cash flow to fund working capital needs, service outstanding debt and fund future capital expenditures.  Adjusted EBITDA is used by some investors and analysts for the purposes of valuing an issuer.  The intent of Adjusted EBITDA is to provide additional useful information to investors and analysts and is also used by management as an internal performance measurement.
   
   
2. Forward-Looking Information
   This news release contains certain "forward-looking information" and "forward-looking statements" (collectively, "forward-looking statements") within the meaning of applicable Canadian securities legislation regarding Converge and its business. Any statement that involves discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions, future events or performance (often but not always using phrases such as "expects," or "does not expect," "is expected," "anticipates," or "does not anticipate," "plans," "budget," "scheduled," "forecasts," "estimates," "believes," or intends," or variations of such words and phrases or stating that certain actions, events or results "may" or "could," "would," "might," or "will" be taken to occur or be achieved) are not statements of historical fact and may be forward-looking statements. Forward-looking statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable, are subject to known and unknown risks, uncertainties, and other factors which may cause the actual results and future events to differ materially from those expressed or implied by such forward-looking statements. Except as required by law, Converge assumes no obligation to update the forward-looking statements of beliefs, opinions, projections, or other factors, should they change.  The reader is cautioned not to place undue reliance on forward-looking statements.

Neither the TSX Venture Exchange nor its regulation services provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

SOURCE Converge Technology Solutions Corp.

Mary Anne Palangio, Chief Financial Officer, Converge Technology Solutions Corp., Email: [email protected], Phone: [phone]; Virtus Advisory Group, Shareholder Inquiries, Email: [email protected], Phone: [phone]

Related Links

https://convergetp.com/