Grafenia has acquired another small software business and has ambitions to expand its reach.

The Aim-listed PLC has agreed a deal to buy document management specialist Watermark Technologies in a cash deal worth up to £2.5m, with £1.5m paid on completion and £1m deferred. 

Watermark is based in Shipley, West Yorkshire and was founded in 2003 by Tim Boggie and Stewart Spink. The duo will continue as part-time consultants for six months. 

Its GDPR-compliant secure cloud- and office-based software products include Papercloud, Volume, and VolumeRemote. The systems are currently mainly used by SME businesses in the insurance, healthcare and financial sectors.

The 11-employee business had sales of £1.21m and EBIT of £440,000 in the year ending 31 March 2022, with around 90% of revenues coming from recurring software fees. 

Grafenia said it believed that use of Watermark systems could be expanded to SMEs operating in other vertical markets. Grafenia corporate development associate James Hughes will become managing director of Watermark.

Acting CEO Gavin Cockerill said the buy was “another step toward growing our software nucleus”. 

“Maximising what Grafenia is good at, selling and supporting software systems that help businesses run better."

Boggie and Spink said they had been planning for retirement and actively seeking a new owner “for the business we have built and cherished over 20 years”. 

“We believe Grafenia is the perfect home to provide continuity of support and maintain long term customer relationships developed over many years. We look forward to seeing Watermark thrive in a larger group."

The deal is Grafenia’s second buy this year after it sold its manufacturing operation in order to focus on software, and subsequently raised £4.25m to fund its ambitions. 

The group acquired ecommerce specialist Vertical Plus in September.