CDI Corp (CDI) Acquires EdgeRock Technologies in $31M Cash Deal

CDI Corp (NYSE: CDI) announced that it has acquired 100 percent of the members' interests in EdgeRock Technologies, LLC (EdgeRock), a privately held, emerging leader in specialist IT staffing. EdgeRock operates a national client platform with headquarters in Boston, MA, and additional offices in Tampa, FL, and Phoenix, AZ. The acquisition will be immediately accretive to CDI earnings, excluding certain one-time costs incurred in completion of the transaction.

Founded in 2005, EdgeRock provides clients with crucial Enterprise Resource Planning (ERP) talent needed to fully optimize the value of their ERP technology investments. This acquisition provides CDI with a national platform for highly-skilled specialist IT staffing with proven delivery capabilities and longstanding relationships with leading consultants to SAP, Oracle and PeopleSoft projects. In addition, EdgeRock has an expanding practice serving other specialized IT skill sets, including business intelligence and data analytics.

EdgeRock will become a division of CDI and continue to operate under the EdgeRock Technology Partners brand name. The current EdgeRock leadership team will continue to manage day-to-day operations of the business.

"The acquisition of EdgeRock represents an important step in our expansion of CDI capabilities to more specialized areas of IT staffing," said Scott J. Freidheim, Chief Executive Officer and President of CDI. "Working with EdgeRock, and leveraging their strong access to experienced talent in ERP and other specialized technology sectors, we can better meet growing demand from existing and new clients to realize greater value from their technology investments."

"We are excited to be an important part of CDI's long-term growth plan and look forward to this opportunity to take our business to the next level," said Peter Begley, EdgeRock's President. "Both CDI and EdgeRock share a common vision for how to better serve evolving needs for access to highly specialized IT talent. Together, we will be in a stronger position to accelerate growth and deliver value across CDI's portfolio of leading technology and industrial customers."

"Thanks to the entire EdgeRock team for their operational excellence and many years of dedication to our clients. I am proud of our strong record of accomplishment," said Frank Selldorff of Momentum Equity Partners, founding investor in EdgeRock. "EdgeRock has created an enduring business model that will prosper under CDI ownership."

Other Transaction Details

Total transaction consideration at closing was approximately $31 million in cash, subject to standard working capital adjustments. CDI will pay up to an additional $4 million of cash consideration contingent on future operating performance. For the 12 months ended August 31, 2015, EdgeRock recognized approximately $44 million in revenue, with gross profit and operating margins well above CDI averages.

For income tax purposes, the acquisition will be treated as an asset purchase rather than a stock purchase. Consequently, CDI will realize a cash benefit from tax amortization with a total value of approximately $11 million over 15 years, if the full amount of contingent consideration is realized.

In addition, CDI is in process of securing a new 5-year asset-based credit facility with total borrowing capacity in excess of $100 million. This new facility would replace the existing 5-year $75 million credit facility that matures in November 2017. The company has engaged Bank of America as lead agent for this financing.

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