In a little over a decade, Empired has gone from being a 15-person IT services business to a publicly-listed managed services player with a legion of hundreds and the clout to take on industry big guns like Accenture and Fujitsu.
Along the way, Empired has merged with other companies, demerged, listed publicly on the Australian Securities Exchange (ASX), faced a Global Financial Crisis (GFC), acquired other businesses, expanded its offering, honed its focus, and grown its customer-base.
At first glance, it may seem as though Empired’s $3 million initial public offering (IPO) on the ASX in 2007 effectively wrote the cheque for a decade of rapid expansion and helped to roll out the red carpet for the company’s transition into major market contender.
But the journey from small business to market heavyweight hasn’t always gone smoothly. Early on in its history, for example, the company found itself merging with a public unlisted company, only to part ways again after it became clear the union was not ideal for either.
However, with a focused strategy and a plan for growth, the company was eventually able to make the leap from small-time player to the real deal without any major casualties.
“In 2005 we were a small services business of around 15 staff,” Empired managing director Russell Baskerville said. “The market was becoming heavily contested by large multinationals, in the larger managed services space. But we saw an opportunity for a mid-tier player to go and be a real alternative.”
Bulking up the ranks
While Empired had a starting point, the road from there proved to be far from straightforward.
First, there was the seemingly daunting task of building out the company’s ranks with an executive team that could help to position it as an appealing prospect for outside public investors.
“We were a very small IT consulting firm and we needed a broader set of skills to take on larger contracts with larger organisations,” Baskerville said. “The first part of the plan was attracting the right leadership.”
The company moved first to bring in some new management skills to bulk up its position, followed by additional delivery skills and people with the ability to write bids and win the sort of work on which it had set its sights.
As Empired brought the “right people” into its ranks, Baskerville and his team found themselves articulating to the company’s corporate advisors where they saw the opportunity in an expansion and, most importantly, the funding needed to make it happen.
The Empired team must have been convincing because, as it turned out, the additional funding was forthcoming, allowing the company to bring some seed capital into the business.
“We got our corporate advisors on the train and buying into the dream, and we also leant on them in terms of early stage funding as well,” Baskerville said. “We raised $600,000 of pre-IPO funding.”
According to Baskerville, the larger the company, the less vital such seed funding becomes for companies wanting to IPO. For Empired, however, which at the time consisted of about 30 people, it made sense.
“If you’re very small with a light balance sheet and you need to invest in your business, taking some early stage capital isn’t a bad idea,” he said. “Obviously, if you’re a much larger business, you can rely on your own balance sheet and the strength of your success in the past.”
Empired took that funding and attracted some senior people in the industry to its ranks, providing credibility, while allowing it to win some managed services contacts on the smaller end of the scale.
Listing into the crash
It was on the back of its burgeoning managed services work, and the resulting industry position it offered Empired, that the company listed the business publicly on the ASX, raising $3 million.
Then the GFC hit.
“Our share price quickly ended up at six cents within months,” Baskerville recalled. “So, our cost of capital really was too high to go and raise any more funds.
“What we then did was to really focus on organic growth for the next number of years. For the next three years, we focused heavily on organic growth.”
Empired used the $3 million cash injection in a number of ways to help drive its organic growth.
The first thing it did was to increase its capability around managed services, developing a 24/7, 365 days-a-year service desk operation, and bringing in more expertise in around securing managed services contracts.
While organic growth was the focus during the few years immediately following the GFC, it should be that the company also bought a small consulting firm, which immediately brought in another 25 or so staff with government contacts to the business — setting Empired up to become a multi-panel-dwelling government supplier.
“That increased our capability around delivering larger, multi-year contracts, but it also increased our capability in terms of the skills that we offered and the relationships and contacts had, particularly within government at that time,” Baskerville said.
While Baskerville suggests that, in retrospect, it might have made sense to wait until Empired had become a much larger company before listing publicly, the company’s IPO strategy has proven effective.
“I think that you would capture the market attention far more if we were a larger size,” Baskerville said. “We were simply too small.
“We managed to get through that, but it was a lot of hard work, and probably a reasonably costly exercise for a company that was still pretty small at that time.”