Meet Cloud House’s second new owner in two years

Meet Cloud House’s second new owner in two years

New Zealand-based cloud provider falls into the hands of AC3

Simon Xistouris (AC3)

Simon Xistouris (AC3)

Cloud House is under new ownership for the second time in two years, following the multimillion-dollar acquisition of parent company Bulletproof by AC3.

The New Zealand-based cloud provider was bought by Bulletproof in February 2016, in a deal worth $1 million up front, with the possibility a further $4.2 million to be paid in a 50/50 split of cash and shares based on performance until mid 2017.

Fast forward to 2018 and Bulletproof has itself been acquired, by Sydney-based provider AC3 in a transaction valued at A$24.7 million following a six-month bidding war with Macquarie Cloud Services.

“We plan to grow our market share in New Zealand,” AC3 CEO, c, told Reseller News. “AC3 has been servicing New Zealand clients for many years, but have managed this remotely, without a physical presence.

“So the addition of Bulletproof’s local team is a great opportunity for us to improve our service levels and really strengthen our position in the New Zealand market.”

Expansion plans come almost four years since Klikon Solutions acquired all the shares in NSW government-owned AC3, for an undisclosed sum in December 2013.

Established in 1998, AC3 was the primary site for High Performance Computing within New South Wales (NSW).

A rebrand to AC3 soon followed post-merger, with the combined business specialising in cloud, software, managed services, procurement, professional services and talent management.

From a customer perspective, AC3 operates across both private and public sectors, working across a range of verticals within the Australian market.

Meanwhile, key vendors include Hewlett Packard Enterprise, HP, Cisco and Microsoft, alongside Citrix, Lenovo, Palo Alto Networks, VMware and ServiceNow.

As a registered supplier within the ICT Services Scheme, all NSW government agencies can purchase from AC3, with the provider operating as one of the anchor tenants in the two purpose built government data centres at Silverwater and Unanderra that are the GovDC.

In acquiring the capabilities of Cloud House - now integrated into Bulletproof - the New Zealand business is headed up by Auckland-based Grant Sweeney as general manager, alongside a presence in Wellington.

“Keeping it local will be key for us, however we also think we can add a lot of value to our customer base by complementing the services we offer locally with the talent of the wider AC3 and Bulletproof teams in Australia,” Xistouris added.

“The [go-to-market] brand is the question on everyone’s lips at the moment. We’re getting that question from within the business as well as outside the business.”

Locally speaking, Xistouris said the Cloud House brand already transitioned to Bulletproof in New Zealand, with the business currently “reviewing” the wider brand from a “holistic perspective” as part of the integration process.

“We have a clear plan in place to bring the businesses together, and once we’ve really defined our combined strategy, we need to build the brand that best supports that strategy,” Xistouris added.

“Nothing is off the table at this point, it’s all about what will resonate best in the market and with our customers. I can say that we’ll look to have a single brand across A/NZ.”

As part of the buyout, AC3 inherits ongoing legal action with Bulletproof dragged into a court battle following claims the provider allegedly mismanaged the acquired business operations of Cloud House, in a bid to miss performance targets and prevent multimillion-dollar earn-outs.

Revealed by Reseller News in July 2017, New Zealand High Court filings lodged by Cloud House directors claim the Australian cloud company allegedly managed the business in a way to intentionally miss such performance targets, alleging losses of $3.8 million as a result.

Specifically, the claim alleges that Bulletproof’s management and business decisions after the acquisition of the Cloud House business assets resulted in the business “not achieving” the earn-out to which it is alleged to be entitled.

In addition, the claim also alleges that Cloud House was “misled” as to Bulletproof’s capabilities, customer base and access to managed services.

Bulletproof - which has delisted from the ASX post acquisition - denied such claims at the time, insisting the organisation managed the Kiwi business in the “best interests” of the company, viewing the claim as “speculative and baseless”.

Four months later, in November 2017, Bulletproof lodged a counter-claim, telling shareholders that there are prospects of success in its defence, advising that its position is "strong".

The legal matter has cost the company around $120,000 and is scheduled to be heard in October 2018.

“The matter is currently being heard before the courts,” Xistouris added. “All I can say is that we’re working towards the best resolution for all parties involved.”

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