Innofactor Plc — M&A Activity 2016

Oct 10, 2016

Innofactor Acquires Lumagate – A Significant Step in Innofactor’s Nordic Expansion

Innofactor Acquires Lumagate – A Significant Step in Innofactor’s Nordic Expansion

Innofactor Plc Stock Exchange Release October 10, 2016, at 8:30 Finnish time

Last night Innofactor reached an agreement on acquiring the entire share
capital of the Lumagate group from the company’s key employees. Lumagate is one
of the leading Nordic IT service providers focused on cloud-based solutions in
the Microsoft ecosystem. The company has over 70 employees in three different
countries: Sweden, Norway and Denmark. Due to the acquisition, Innofactor will
expand into Norway and will strengthen its position significantly in Sweden and
Denmark. Innofactor considers that, after the acquisition, it has reached the
strategic target of becoming the leading provider of Microsoft based solutions
in the Nordics. In the future, Innofactor’s vision will be the leading provider
of cloud solutions and digital transformation in each of the Nordic Countries.

Lumagate – The leading Microsoft Azure and infrastructure provider in the
Nordic Countries

Lumagate focuses on delivering cloud solutions based on Microsoft technologies.
These solutions support and improve customers’ business processes. The
clientele comprises of over 300 customers in several fields, including the
public sector. The company has reached the upmost Gold level in six different
Microsoft partner programs, and it has been nominated a Microsoft Partner of
the Year in different areas in all three countries in which it operates.
Lumagate’s customers include, for example, Santander Consumer Bank,
Felleskjøpet Agri, ICA, Skatteverket, Unionen, Thomas Cook, Kriminalvården,
Nilfisk, and AP Pensionsservice.

The Lumagate companies combined net sales in the last fiscal year (January
1–December 31, 2015) was approximately EUR 8.7 million*, which shows an
increase of 35% from 2014. The operating margin (EBITDA) was approximately EUR
0.2 million*, which was approximately 3% of the net sales. The net sales for
the current fiscal year of 2016 is estimated to be approximately EUR 11
million* and operating margin approximately 7%. The company has 70 employees in
Sweden, Norway and Denmark. Of these, over 10 have reached the Microsoft's Most
Valuable Professional level. Lumagate and its financial figures will be
consolidated into the Innofactor Group as of October 1, 2016.

Purchase price, payment and financing

The purchase price will be determined by Lumagate's EBITDA in 2016, 2017 and
2018. The purchase price (Enterprise Value, EV) is at minimum approximately EUR
4.7 million (approximately SEK 45 million) and at maximum EUR 10.5 million
(approximately SEK 100 million). The sellers will be paid in cash approximately
EUR 4.7 million in SEK upon closing (approximately SEK 45 million). This
payment is planned to be financed with a new bank loan of max. EUR 5 million.
The rest of the purchase price, a maximum of approximately EUR 5.8 million
(approximately SEK 55 million), is tied to EBITDA growth after closing and is
intended to be paid primarily in Innofactor shares during 2018 and 2019. The
part to be paid in shares includes a transfer restriction, which will be
gradually released during a period of 24 months and which concerns 90 percent
of the shares.

As part of the arrangement Innofactor receives an option to acquire Ironstone,
a company providing hosting services for Azure in Sweden and Denmark that do
not compete with Lumagate. The option expires at the end of 2019. The owners of
Ironstone are partly the same as the sellers of Lumagate.

All sellers are key persons in Lumagate and will continue to work in central
roles in the company. The CEO of the Norwegian company, Stig Nerland, will
continue as the CEO of Innofactor’s Norwegian company and will become the
Innofactor Group’s Country Manager in Norway and a new member in the Innofactor
Executive Board.

The integration of Lumagate and Innofactor operations will start immediately,
and the goal is to implement it before the end of 2018.

Innofactor's Nordic growth strategy is realized

After the Lumagate acquisition, Innofactor has over 600 employees with
Microsoft-based know-how and expertise in the Nordic Countries. The companies
in Finland, Sweden, Denmark and Norway have a strong customer base, which
covers commercial, public and third sector customers. Lumagate strengthens
significantly Innofactor's comprehensive offering of Microsoft-based solutions,
products and services in the Nordic Countries, especially Azure cloud offering.
The acquisition offers significant selling potential in all Nordic Countries
for solutions based on Lumagate's know-how, and also brings Innofactor's
services available for Lumagate's customers. The new Innofactor will also get
more attention from Microsoft in all levels, especially in Norway, but also in
Europe and globally.

"The Lumagate acquisition is a significant step in Innofactor’s strategy of
Nordic expansion. We consider that, after the acquisition, we have reached the
position of the number one Microsoft-based solution provider in the Nordic
Countries, as defined in our strategy. It also enables a strong base for our
new vision be the leading provider of cloud solutions and digital
transformation in the each of Nordic Countries. Lumagate's high level of
competence and strong customer base complement Innofactor's current business
operations very well," says Sami Ensio, Innofactor's founder and CEO.

"The demand for cloud-based solutions has increased significantly in the recent
years. Innofactor's offering covers several important areas for which Lumagate
has not had solutions before. We are enthusiastic about the possibility of
expanding our services by using Innofactor's solutions. We consider those to
have remarkable sales potential," says Ulf Månsson, Lumagate's founder and
Group CEO

Lumagate group key figures

Lumagate's combined net sales, EBITDA and operating profit in financial periods
of January 1–December 31, 2015, and January 1–December 31, 2014, according to
the Swedish, Norwegian and Danish book-keeping standards were as follows (EUR
thousand*):

EUR thousand* Jan 1–Dec 31, 2015 Jan 1–Dec 31, 2014
Net sales 8,745 6,470
EBITDA 235 53
Operating profit (EBIT) 191 32

Lumagate's combined balance sheets on December 31, 2015, and December 31, 2014,
were as follows (EUR thousand*):

EUR thousand* Dec 31, 2015 Dec 31, 2014
Non-current assets 761 283
Receivables and current assets 2,942 2,161
Total 3,703 2,444
Shareholders’ equity 933 322
Liabilities 2,770 2,122
Total 3,703 2,444

*) The combined financials above have not been audited. Exchange rates used for
the financials above:

1 euro = 9.50 Swedish kroner.

1 euro = 9.25 Norwegian kroner.

1 euro = 7.44 Danish kroner.

Espoo, October 10, 2016

INNOFACTOR PLC

Board of Directors

Additional information:

Sami Ensio, CEO
Innofactor Plc
Tel: +358 50 584 2029

Briefings about the acquisition

On October 10, 2016, at 10:00 Finnish time, Innofactor will hold a briefing
concerning the acquisition for investors, analysts and media in Finnish at
Pörssiklubi, address: Fabianinkatu 14, 4th floor, 00100 Helsinki.

In the briefing, the acquisition and its effects will be presented by
Innofactor's founder and CEO Sami Ensio, Chairman of the Board Ari Rahkonen,
CFO Patrik Pehrsson, and the director responsible for acquisitions Paavo
Pakkanen. The presentations of the briefing will be available on Innofactor's
web site after the briefing. The briefing is open to everyone.

Innofactor will also hold a conference call in English for investors, analysts
and media on Monday, October 10, 2016, at 16:00 Finnish time. Registrations to
ir@innofactor.com before Monday, October 10, 2016, 14:00 Finnish time.

Distribution:

NASDAQ OMX Helsinki
Main media
www.innofactor.com

Innofactor
Innofactor is the leading Nordic provider of cloud solutions and digital
transformation. Innofactor has Microsoft Ecosystem’s leading expertise and the
most comprehensive offering in the Nordics. Innofactor has over 600 eager and
motivated top professionals in Finland, Sweden, Denmark and Norway. Innofactor
serves over 1,500 commercial, public, and third sector organizations. In 2011
to 2015, the annual growth of Innofactor’s net sales has been approximately
35%. The Innofactor Plc share is listed in the technology section of the main
list of NASDAQ Helsinki Oy. www.innofactor.com

(In the information above, the Lumagate acquisition has been taken into
account.)

Lumagate
Lumagate focuses on providing cloud-based solutions using Microsoft
technologies, which support customers’ business processes. The clientele
comprises of over 300 customers in several fields, including the public sector.
The company has over 70 eager and motivated top professionals in six locations
in Sweden, Norway and Denmark. In the financial period of 2015, Lumagate's net
sales grew by 35%. The company has reached the upmost level in six different
Microsoft partner programs, and it has been nominated a Microsoft Partner of
the Year in different areas in all three countries in which it operates.
Lumagate’s customers include major organizations from the public and private
sectors, for example, Santander Consumer Bank, Felleskjøpet Agri, ICA,
Skatteverket, Unionen, Thomas Cook, Kriminalvården, Nilfisk, and AP
Pensionsservice. www.lumagate.com