De.mem Takes Over Specialist Service Provider for Mining Customers

De.mem, the international provider of decentralized water treatment systems and membrane technology, is coming up with the next acquisition. Following the recent transaction in which De.mem acquired the pump manufacturer Border Pumpworks, the Australian-headquartered company has now secured another acquisition candidate in the highly fragmented Australian market: Auswater Systems.
De.mem Takes Over Specialist Service Provider for Mining Customers

Image source: De.mem Limited

With this acquisition, De.mem continues its strategy of integrating its technology into long-term customer relationships.

Auswater Systems, based in Perth, Western Australia, offers specialized services primarily to more than 50 established mining clients throughout Western Australia. As a profitable service company with nearly 30 years of business history, Auswater operates water and wastewater treatment plants for industrial clients and supplies chemicals and consumables for ongoing operations.

Acquisition with Numerous Positive Effects
“Auswater is an excellent fit for us, securing further stable and recurring revenues as well as high margins,” explains De.mem CEO Andreas Kröll, highlighting the benefits for his company. Auswater’s revenues are almost entirely recurring, contributing to De.mem’s existing approximately 91% recurring cash inflows. Auswater’s gross margin exceeds 60%, which will further increase De.mem’s overall gross margin from 36% (FY 2023).

The company not only achieves high margins but also offers De.mem the opportunity to further expand its business in the important Western Australian region. The acquisition of Auswater also opens up additional revenue cross-selling and cost synergies. Operational synergies are expected, particularly with De.mem subsidiary De.mem-Capic, which has been serving mining clients since 2006. There is little overlap with existing customers, making Auswater’s customer base very attractive for De.mem.

Andreas Kröll further explains that the combined De.mem Capic-Auswater business now holds a leading position in the highly strategic mining region of Western Australia, and serves clients in the mining and resource sector by providing technical services, specialty chemicals, and consumables.

Overall, the acquisition promises many opportunities with comparatively manageable risk, according to company leader Andreas Kröll. The company is attractively valued and brings De.mem significantly closer to its goal of achieving a balanced EBITDA. “De.mem had a loss of AUD 750,000 in the fiscal year 2023; together with Auswater’s result, this would have been only AUD 300,000,” Kröll calculates. A concrete estimate for the current fiscal year is not available; however, Kröll assumes that the break-even point will be reached in the coming quarters.

The acquisition, costing around AUD 2.1 million, will be financed through a share placement, supported by both new and existing investors. New institutional fund managers and company executives are also participating. Thus, Chairman Cosimo Trimigliozzi, board member Harry De Wit, and CFO Andrew Tay have committed to investing AUD 300,000 as part of this placement.

Integration Ongoing
According to Andreas Kröll, no further acquisitions are currently planned. The company will be occupied with the integration of the two companies in the coming months. De.mem now looks back on a series of successful acquisitions. Since 2019, this is the sixth transaction. The five previous acquisitions each led to significant revenue increases.

For the first four acquisitions, the average revenue growth was 63%. “We still consider the model of integrating our innovative membrane technologies into established customer relationships to be highly attractive. Therefore, we will continue to adhere to this strategy,” explains Andreas Kröll.

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