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Sinch to Acquire SAP Digital Interconnect to Grow Global Cloud Communications Capabilities

Sinch AB, a global leader in cloud communications for mobile customer engagement, has entered into a definitive agreement to acquire SAP Digital Interconnect, a unit within SAP SE, for a total cash consideration of EUR 225 million on a cash and debt-free basis.

SDI offers cloud-based communications products and serves more than 1,500 enterprise customers throughout the world. Its customer base includes many of the world’s most valued brands, including top technology companies, banks, payment gateways, retail brands, and mobile operators.

“Sinch and SAP both recognize the power of cloud technology to drive business transformation and deliver a superior customer experience. With SDI now becoming a part of Sinch, we build on our scale, focus and capabilities to truly redefine how businesses engage with their customers, throughout the world”, comments Oscar Werner, Sinch CEO.

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Sinch has forged a strategy to grow the company through both organic and inorganic means. A long-term focus on profitability and cash flow makes Sinch well placed to continue and execute this strategy also in times when overall macroeconomic conditions are unfavorable.

“SAP Digital Interconnect is a leader in its area showing profitable growth and reaching 99 percent of the world’s mobile subscribers. Looking at Sinch’s innovation and investment strategy in the area of cloud communication platforms, we welcome them as the new owner of SDI. Sinch is perfectly positioned to unleash further growth potential we see in SDI,” says Thomas Saueressig, member of the Executive Board of SAP SE, responsible for SAP Product Engineering.

SDI consists of three segments. Programmable Communications includes SDI’s enterprise-targeted API-based offering for omnichannel customer engagement through SMS, push, email, WhatsApp, WeChat and Viber. In 2019, SDI processed over 18 billion enterprise messages, an increase of more than 17 percent over 2018. Carrier Messaging includes a range of business-critical services to mobile operators, including products for person-to-person messaging, reporting and analytics. In 2019, SDI processed more than 292 billion carrier messages. Enterprise Solutions spans products for contact center, including public cloud solutions, and critical event management.

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Financials and synergies

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For the twelve months ended March 31, 2020, SDI recorded revenues of EUR 340 million, Gross Profit of EUR 94 million, and adjusted EBITDA of EUR 15.4 million. The business employs ca. 330 people in 20 countries and is headquartered in San Ramon, California.

In the twelve months ended March 31, 2020, Programmable Communications accounted for 67 percent of SDI revenues, with Carrier Messaging contributing 28 percent and Enterprise Solutions contributing 5 percent. Year-on-year revenue growth over the past two years has been around 10 percent.

On a preliminary basis, net cost synergies from various sources of the combination of Sinch and SDI are expected to reach EUR 11 million, reaching full run-rate in the fiscal year 2022. One-off carve-out and integration costs of EUR 6-8 million are expected over the same period.


The transaction values the acquired business at an EV/EBITDA multiple of 14.6x, or 8.5x including estimated synergies at full run-rate.


The acquisition is financed using Sinch’s cash at hand and available credit facilities.

Sinch has a financial target to maintain net debt/adjusted EBITDA below 2.5x over time. As of Q1 2020, net debt/adjusted EBITDA was -1.0x when measured on a rolling, twelve-month basis. On a pro forma basis, which includes Adjusted EBITDA in acquired entities over the past 12 months, net debt/adjusted EBITDA was -0.9x. The acquisition of Chatlayer, which was closed on April 1, affects this ratio by 0.1x so that pro forma net debt/adjusted EBITDA is approximately -0.8x.

If the acquisition of SDI had already been completed, pro forma net debt/adjusted EBITDA would have been 2.2x. Moreover, the recently announced acquisition of Wavy is awaiting regulatory approval, and is expected to close in H2 2020. Had the acquisition of Wavy also been completed, pro forma net debt/adjusted EBITDA would have been 2.7x.

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