Written by Ron Shamgar
After a year dominated by global mega-cap tech and AI headlines, a different story is quietly unfolding on the ASX: the resurgence of small caps, particularly those in the crosshairs of private equity and strategic acquirers. With interest rates expected to fall over the coming 12 months, liquidity is returning, and buyers are circling quality businesses trading at undemanding valuations.
Johns Lyng Group: From Market Darling to Takeover Target
Johns Lyng Group (ASX: JLG) has been a business TAMIM tracked closely for years. It was a classic fund manager favourite, priced to perfection, and for a long time, we simply couldn’t justify paying the premium despite our admiration for the business model. However, as the market soured on small caps and JLG cycled through a period of weaker industry activity and earnings downgrades, sentiment shifted.
By February 2025, the stock had halved from its highs and was trading at just $2.00. Management insiders began to buy in material size, signalling their confidence in the underlying business. Following a deep-dive management meeting, we initiated a position at $2.20, based on our view that the business still retained core hallmarks: a founder-led structure, industry leadership, a solid balance sheet, and improving medium-term fundamentals.
In July, we were rewarded. Pacific Equity Partners (PEP) swooped in with a $4.00 per share offer, valuing the business at $1.1 billion. The deal represents an 82% premium to our entry price and confirms a broader thematic: quality small caps with temporary earnings issues but strong strategic value are firmly on the radar of buyers.
The Broader Pipeline: TAMIM Takeover Watchlist Stocks in Motion
While JLG’s takeover provided a strong tailwind to July performance, several other holdings in our portfolio continue to progress well and in our view, remain strong takeover candidates.
Qoria (ASX: QOR)
Qoria is the leading provider of child safety and monitoring software in K-12 education markets across the US, Australia, and UK. It has built an impressive moat, particularly within the US school district ecosystem, and is now expanding its direct-to-parent consumer business.
The stock recently reported Q4 FY25 results that saw exit ARR grow to $145 million (+25% YoY), driven by record Q4 ARR additions and expanding consumer traction. Operating leverage is now kicking in: EBITDA was up 670% YoY to $15.4 million, and the company is now both free cash flow positive and Rule of 40 compliant. Despite this, it trades at just 5.1x ARR versus peers at 7–12x.
With Life360 (ASX: 360) as the obvious comp, Qoria’s premium product positioning and rapid margin expansion make it a compelling relative value story. And given its strategic position in both public and consumer safety markets, it wouldn’t be surprising to see interest from global players in the space.
Alcidion Group (ASX: ALC)
Alcidion is a healthcare workflow software provider focused on hospitals across the UK and Australia. It helps clinicians and administrators improve efficiency, safety, and compliance in patient care delivery. The company has been executing strongly, especially in the UK, where recent NHS contract wins are driving a revenue inflection.
The company’s FY25 report featured positive operating cash flow of $7.4M in Q4, annual cash receipts of $50.9M, and total new contract wins (TCV) of $73.8M. It also reaffirmed guidance for EBITDA to exceed $4.5M, highlighting an improving bottom-line trend.
We initiated our position at 8 cents; the stock closed July at 11.5 cents. ALC’s strong product-market fit and international growth potential make it a natural target for larger healthcare technology platforms or private equity looking to roll up niche vertical software providers.
Credit Clear (ASX: CCR)
Credit Clear delivers a digital-first approach to debt collection, blending AI and behavioural analytics into a modernised receivables management platform. It straddles both B2B and B2C collections and has made impressive inroads into insurance and financial services verticals.
FY25 revenue reached a record $46.9 million (+12% YoY), with underlying EBITDA of $7.4 million (+76% YoY). June was a record month, and multi-year contracts with top insurers provide strong forward visibility. Importantly, EBITDA margins are now over 16%, and the business holds $15.6 million in cash.
We estimate FY26 revenue of $52–54 million and EBITDA of $11–12 million. The debt collection space is ripe for consolidation, both private equity and larger incumbents will be looking closely at CCR’s strong digital proposition and sticky client base.
Austco Healthcare (ASX: AHC)
Austco designs and delivers nurse call and communication systems for hospitals and aged care facilities. Following the acquisition of Amentco and G&S Technologies, the business has grown revenue by 37–41% YoY, reaching $80–82 million in FY25, with EBITDA up 54–67%.
Their $55.8 million backlog, $14.4 million cash balance, and strong revenue visibility provide a platform for continued growth. We estimate FY26 EBITDA of at least $16 million, with earnings per share approaching 3 cents. At just above a $100 million market cap, Austco is likely to appear on the radar of small-cap institutional investors and potentially strategic acquirers in the healthcare tech or equipment space.
Enero Group (ASX: EGG)
Enero recently divested its 51% stake in OBMedia, taking a non-cash hit in the process, but streamlining its focus to its high-performing marketing agencies: BMF, Hotwire, and Orchard. FY25 EBITDA is expected to come in at the top end of guidance, with FY26 likely to see EBITDA of $12–14 million from core operations.
With more than $30 million in net cash and a market cap around $90 million, the stock is trading at less than 5x forward EBITDA. Capital management, special dividends, or strategic interest are all plausible catalysts for a re-rating or acquisition. The recent divestment removes what was likely a deal-blocking asset.
Why Takeovers Are Back on the Menu
After several quiet years, 2025 is shaping up to be a breakout year for mid-market M&A, particularly in Australia. Why?
- Interest Rate Cycle Has Turned: With inflation moderating and central banks signalling rate cuts, cost of capital is declining. This has huge implications for PE firms and strategic acquirers who rely on debt to fund takeovers.
- Private Equity Dry Powder: Globally, PE firms are sitting on over $2 trillion in dry powder. They need to deploy capital and are increasingly targeting smaller, undervalued listed companies where the control premium can still deliver a high IRR.
- ASX Valuations Still Depressed: Despite recent strength, many high-quality ASX small caps still trade at significant discounts to their historical valuation ranges, especially on EV/EBITDA and ARR multiples.
- Strong Founder Ownership: Many of the companies we invest in are founder-led or have concentrated ownership. These tend to drive higher strategic value and better alignment in a deal.
- Sector-Specific Tailwinds: Healthcare, digital platforms, education tech, and infrastructure-enabling services are all sectors seeing strategic demand, and the ASX boasts several niche leaders.
Key Lessons for Investors
While many investors obsess over macro headlines or try to trade the latest AI rally, the real money is often made by identifying value and being patient. In the case of JLG, it took less than 12 months for sentiment to shift and a takeover to crystallise significant value.
This underscores the importance of:
- Deep fundamental research
- Understanding founder incentives
- Buying quality businesses when unloved
- Monitoring management behaviour (insider buying matters!)
- Investing with a long enough runway for the thesis to play out
These themes are central to the TAMIM Australia All Cap strategy.
TAMIM Takeaway
July 2025 served as a reminder that markets reward patience and process. The Johns Lyng takeover was a textbook outcome, tracking a business, waiting for price to meet value, and capitalising when the market overlooked long-term fundamentals.
We believe several other portfolio holdings are poised for similar recognition. Whether via takeover or re-rating, the combination of solid business models, founder-led execution, and an improving capital markets environment is fertile ground for value realisation.
The small cap space remains fertile hunting ground for investors with discipline, a long-term view, and a willingness to go where others aren’t looking.
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Disclaimer: Johns Lyng Group (ASX: JLG), Qoria (ASX: QOR), Alcidion Group (ASX: ALC), Credit Clear (ASX: CCR), Austco Healthcare (ASX: AHC), and Enero Group (ASX: EGG) are held in TAMIM Portfolios as at date of article publication. Holdings can change substantially at any given time.
