Since the emergence of Flybuys and Frequent Flyer schemes proving hugely profitable for the respective owners by demonstrating the value of loyal customers, loyalty tech has become a huge market and one that Gratifii (ASX: GTI) is seeking a bigger slice of pie via acquisitions of Australia’s Club Connect and New Zealand’s Rapport Group. 

The acquisitions are poised to significantly expand Gratifii’s scale, offering increased revenue potential, cross-selling opportunities, and greater market access across Australasia.

Gratifii has executed a Share Purchase Agreement (SPA) to acquire Club Connect for $8 million. The transaction includes $6 million in cash and $2 million in equity. Club Connect, established 12 years ago, has built a strong reputation as a premier loyalty and rewards platform. Club Connect provides bespoke loyalty solutions to Australia’s auto clubs, serving a vast network of over 8 million members and partnering with key providers like the Big Red Group, which offers more than 5,000 experience-based rewards.

In FY24, Club Connect generated approximately $49.4 million in revenue and posted an underlying EBITDA of $1.64 million. Gratifii plans to leverage immediate synergies from the acquisition by transferring existing rewards purchase arrangements to its own platform. This shift is expected to boost margins on some products by 6% to 9%, enhancing profitability for both companies.

The acquisition also opens doors to cross-selling opportunities, providing access to 80-plus enterprise clients and offering the combined entity an expanded footprint across Australian auto clubs.

In a parallel move, Gratifii has also signed an SPA to acquire New Zealand’s Rapport Group for NZ$0.5 million (A$455,000). Rapport specialises in loyalty and brand engagement programs for enterprise clients, including the Automobile Association of New Zealand and One NZ (formerly Vodafone NZ). This acquisition will enhance Gratifii’s presence in the New Zealand market, adding two major enterprise clients and generating around A$4.1 million in annual revenue, with positive normalised EBITDA.

By bringing Rapport into the fold, Gratifii gains a senior resource in New Zealand, which will help to drive further business development in the region. The acquisition is expected to increase Gratifii’s ability to serve over 23 million end-user accounts across Australia and New Zealand, significantly boosting its market position.

Post-acquisition, the combined entity is expected to generate pro forma revenue of approximately $84 million in FY24, with underlying EBITDA projected to reach $3.2 million once synergies are implemented. 

“The completely transformative acquisition of Club Connect and Rapport are something we have been working towards for some time now,” said Gratifii Managing Director, Iain Dunstan. 

“The increased scope and scale will make Gratifii the leader in Australia and New Zealand for enterprise level loyalty and rewards solutions, providing a strong, profitable foundation for continued growth.” 

Gratifii is raising approximately $9 million to fund the acquisitions and associated costs. This will be achieved through a mix of equity placement and an Accelerated Non-Renounceable Entitlement Offer.