VTS Group is scoping a potential merger and a further two takeovers as it continues on its path of acquisitive growth.
Company founder, Glenn Kennedy, told ARN the Sydney-based managed services provider (MSP) is pursuing a “much larger entity” which it will either merge with or acquire before Christmas this year.
Kennedy did not name the target, but revealed it will be a services-based IT company which operates horizontally.
Kennedy also said VTS will buy a further two MSPs before October, adding to its merger with Toowoomba’s Downs Microsystems in October 2013 and more recently its purchase of the assets and business of Canberra’s Dataflex.
The six-year-old VTS is taking an acquisitive approach to growth because it previously struggled to get its foot in the door with C-level executives and business owners despite its ability to win contracts.
“When we go to market, we are not selling to IT departments, but CEOs, CIOs, and business owners,” Kennedy said.
“When you call one of those, they say ‘go talk to the IT department’, so unless you have an established relationship with C-level managers to talk about business issues, you get flogged off and the IT departments don’t want to talk to you.”
Kennedy said VTS has a 92 per cent success rate on getting a sale when it manages to reach a CEO, but only a two per cent success rate in actually getting to one.
“We decided the best approach was to purchase other companies that already have established relationships.”
With Downs significantly boosting the VTS Group’s headcount, Kennedy said he pursued Dataflex because it “had a number of very key staff left, and I had the capability to get to them”, following the Canberra company’s voluntary administration.
Dataflex went under because of what Kennedy brands “un-Australian practices”; it was left begging when a deal to sell to Indian company Tech Mahindra fell through, with the company unable to cope with its losses.
“From my position where staff are everything to me, I felt that picking them up and injecting the right money, systems and processes into the company would see it recover,” he said.
The VTS Group currently employs about 62 staff. It has already hired five to six former Dataflex employees, and is talking to others.
But while the company’s history and employees were key, Dataflex came with panel contracts with the Federal Government.
While the conversion of these deals was not guaranteed when VTS attained Dataflex’s business, Kennedy expects to seal 12 contracts over the next eight weeks.
VTS will continue to drive its business through a fixed-price approach.
“VTS comes in and does a pre-audit of your environment, understands the environment, and comes back with a fixed-cost to manage that over a period of three to five years. That price is guaranteed. VTS takes care of all additional bills, not the customers.”
Kennedy said this is crucial to the company’s success as typically, competitors can do that in components, but not end-to-end.