Lancom Group has acquired the New Zealand arm of the managed service provider (MSP) business of Australian company Powernet.
Powernet, which earlier this year merged with Evolve IT and employs 100 people across A/NZ, is selling the NZ business, Powernet IT Consultants NZ, to concentrate more on the Australian market, said Lancom Group CEO Waruna Kirimetiyawa.
The business is being bought as a going concern, including goodwill, assets and customer base but not the brand. Powernet's local staff will join the combined group adding around 10 per cent to Lancom's capacity.
The buyout, Lancom's first, will add key staff, capability and reach, Kirimetiyawa said. Powernet brings with it more than 160 new customers.
“Most of these customers are typical managed services provider clients. Our opportunity is to offer our broader solution range, including Microsoft productivity applications, Azure and Amazon Web Services, and custom application development.”
Lancom is seeking rapid growth over the next five years, Kirimetiyawa said. Acquisitions can accelerate that on top of organic growth, which is tracking at around 35 per cent.
"We’re targeting acquisitions as the preferred mode for rapid expansion," he said. "At the same time, we’re growing organically through a focus on service excellence and providing solutions attractive to our client base."
The acquisition will provide a smooth transition for Powernet's company’s local customers, Kirimetiyawa said.
The two companies are formalising a partnership to accommodate clients in their respective regions, with the view to extend each other’s capability and to provide continuity to Powernet’s NZ clients headquartered in Australia.
“That’s the biggest challenge with a deal of this nature. It falls to us to provide service continuity while making sure we remain relevant to our new customers," Kirimetiyawa said.
“While we’re an ICT company, this is still very much a people business, so we are investing time and effort into relationship building and understanding the technology needs of our customers."
Lancom has worked closely with its existing customer base, bringing them into the cloud as part of a modernisation drive, Kirimetiyawa says.
“We’ve long recognised the advantages of software as a service and cloud architectures. That’s why we’ve brought our customer base along and they are seeing those advantages on a daily basis,” he said.
Many of the customers now coming on board are still traditionally architected.
“We see an opportunity to help modernise, improve and deliver the cost and efficiency advantages associated with cloud technologies, specifically in infrastructure, collaboration and productivity.
There are also substantial opportunities in automation and integration. So, while it is ‘business as usual’ from 1 July, we’ll be talking that through with our customer base in the coming months.”
Lancom is on the lookout for further acquisitions with a specific focus on managed services providers looking to become part of a larger organisation.
“Deep expertise in security, application development and systems integration is of interest, as is vertical specialisation.”
There was a massive consolidation in the MSP industry under way because many founders were getting older and seeking to retire, Kirimetiyawa said.
Often these companies were struggling with the pace of change in the industry and looking to cash out.
Kirimetiyawa said Lancom invests heavily in automation and hope to improve the efficiency margin of acquired businesses.
Lancom's business is in three parts with MSP being the largest at around 75 per cent. Custom software development is around 20 per cent while the final five per cent is attributable to a SaaS startup called DeskDirector, which services around 1000 local and international MSPs.