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Commander sell-off completed

Commander sell-off completed

A year after receivers were appointed to ASXlisted ICT integrator, Commander, the book is finally closing on one of the industry’s former powerhouses. And for several rival players, the company’s staggered departure from the IT reseller, integrator and managed services markets has delivered significant business benefits.

Last week, Commander receiver, McGrathNicol, announced the sale of the last piece to telecoms entity, Communications Australia. McGrathNicol partner, Jason Preston, said the WA-based company purchased the enterprise network business and customer accounts as an ongoing concern and had offered positions to 40 of the 80 staff. The enterprise division focuses on equipment sales and services to mid-market and enterprise customers.

Communications Australia will assume responsibility for all accounts under its own branding. Preston declined to comment on the financial details. Commander’s SMB business, which was maintained largely through its franchise network, was acquired by ASX-listed telco, M2 Telecommunications Group, for $19 million in June.

The enterprise sale is the fi nal stage of McGrathNicol’s efforts to sell-off Commander’s operations and comes just after the one-year anniversary of its appointment as receiver.

“Our aim was always to affect ongoing concerns of the business. Given the market conditions, it took some time, but we got there in the end,” Preston said.

Following its appointment on August 7, McGrathNicol opted to sell Commander’s business in two parts: Telecommunications, including the Franchise Network; and the managed and professional services business. Six months earlier, Commander announced its decision to exit the IT hardware reseller space.

The combination of these two factors generated masses of opportunity for rival players to source new skills through acquisition, and woo customers looking for another ICT supplier. For other players such as CSG, Empired, ASG, HP/EDS, Insight, Logica and Hyro, Commander’s removal from the managed services landscape has been a source of growth.

In its full-year fi nancial report, ASX-listed CSG highlighted the acquisition of Commander’s managed services business as a company-changing event, and one that provided the skills and relationships it needed to grow its operations.

Both Hyro and Empired also acquired select customer lists from Commander which bolstered their managed services practices.

In recent months, several ex-Commander contracts have been picked up by others including a sole Microsoft licensing arrangement with the Victorian Government (Insight), a $96m outsourcing contract with former Group 8 participant, the Department of Agriculture, Fisheries and Forestry (EDS), and a $7.6m deal with the National Health and Medical Research Centre (Logica).

Head of consulting for government research group Intermedium, Kevin Noonan, said mediumsized suppliers had gained the most, both through customer acquisition as well as staff recruitment. As examples, he highlighted Logica’s $10m deal with ACMA, and ASG’s success with CASA ($7.9m).

“Commander itself, in the straight IT space, had a lot of good people in Canberra. There has been a close watch of where people have moved to – in a sense, Commander’s reputation was built on the quality of its staff,” he said. Noonan highlighted Logica and Data#3 as key examples of suppliers that scored significant staff wins.

“At a time when the market wasn’t quite there federally, the demise of Commander has seen other suppliers make strategic steps forward,” he added. Data#3 benefi ted from Commander’s exit not by direct acquisition, but as a result of picking up staff and customers.

Managing director, John Grant, said Commander’s demise was most significant after it closed its IT reseller procurement business and retrenched 600 staff, 18 months ago.

“Commander had a positive impact on our business and it also came at a good time – there’s no doubt we became stronger at a time when the market was getting weaker,” he said. “Really the biggest impact was back in February 2008, when they sacked 600 people.

“It made the difference to our area of the market in that fi rst period as customers found their way elsewhere.”

On the telecommunications side, Commander’s exit also offered new ways for communication providers to expand their offerings and geographic footprint. M2, which picked up both the SMB telco business along with Commander’s Unitel wholesale network arm, highlighted Commander’s iconic brand and broad SMB customer base as a strong contributor to its FY09 end-of-year results.

Acting CEO and one of two major shareholders in the Communications Australia business, Mario Vecchio, said its purchase of Commander’s enterprise networking assets last month provided the stepping stone for its national growth strategy. Communications Australia is headquartered in Perth, Western Australia, and has built a presence in Victoria. It also has a smaller base in Sydney and employs 100 staff.

“When the opportunity came up for the enterprise business at Commander, we negotiated with the receivers and were successful,” Vecchio said. “It was synergistic with what we do.”

Vecchio’s private equity firm also owns six technology development businesses offshore. The next step was to integrate all of them together to form a consolidated group. He is also in the process of building out Communication Australia’s management team in Victoria.


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