Dave Stevens - From builder to buyer

Dave Stevens - From builder to buyer

In founding one of Australia's MSPs in Brennan IT, Dave Stevens explains the process of progression.

Dave Stevens (Brennan IT)

Dave Stevens (Brennan IT)

In starting out in a loft in the inner west of Sydney, Balmain was the founding home of Brennan IT.

Built to service the Australian mid-market by four tech experts and enthusiasts, two decades later the one-time start-up now operates 6km west, slap bang in the central business district of Sydney.

During those 20 years, the business has blossomed into one of the leading managed services providers in Australia, still working closely with many foundation customers of 1997.

“You have to be delusional.”

Said with a wry smile, with an undertone of truth, Brennan IT executive chairman Dave Stevens is no stranger to building a business.

In founding Brennan IT, Stevens has cemented his place in the channel through the creation of
an industry leader, one that has amassed over 1,000 customers across a multitude of industries.

“Every entrepreneur is delusional,” added Stevens, when delivering the keynote address at the ARN Judges’ Lunch 2017 in Sydney. “You have to work off the belief that everything will work out and that you have to just keep trying and smashing through the barriers.”

In short, it’s about seizing the moment as an entrepreneur.

“When I look at the market, I ask, how can you make this better?” Stevens explained. “What is wrong with a particular technology in the industry or what makes customers constantly complain?

“If you’ve ever tried to catch a taxi at 3pm in Sydney then you’ll know that the taxi industry for example has a huge problem. With those obvious things, there’s opportunity to dive in and have a go as an entrepreneur.

“That’s the kind of innovation that works best for Brennan IT, finding things that look wrong and then fixing it. Someone has to fix it.”

Yet Stevens — who was inducted into the ARN Hall of Fame in 2015 — acknowledged that while appetite for entrepreneurship remains high in Australia, challenging market conditions remain for those looking to create the next high-flying technology start-up.

“Growing up in an industry that was growing up itself has provided an insight into how to change over time,” Stevens observed. “But in looking back and in seeing how the market has changed, it was easier back then as things were different.

“It’s harder now because over time the expectation of value has moved up markedly, and our ability to realise value has dropped. I think we are in a bit of a bubble right now and there will be a correction coming.”

M&A mania

With an arsenal of capabilities around cloud computing, networking, unified communications, business transformation, security and digital disruption, Brennan IT continues to bring smart strategies to the industry, built around big and practical ideas.

In looking ahead, Stevens — alongside CEO, Stephen Sims and a growing staff base — is embarking on the next level of growth for the business, as he transitions from builder to buyer.

Since stepping out of the hot seat in late 2015, Stevens now heads up the company’s mergers and acquisitions activities, pursuing a progression plan built around organic growth and purchasing complementary capabilities.

“Whilst organic growth remains an imperative and a sign of a great business, it’s important to use resources like cash or credit to add to this growth via appropriately priced yet quality acquisitions,” Stevens said.

Dave Stevens (Brennan IT)
Dave Stevens (Brennan IT)

“Doing both well is important for any great business.”

Spanning company earnings, contracted monthly recurring revenue, key person risk, customer base, culture and quality of staff, Stevens acknowledged that there’s “so much to look for” when evaluating potential acquisition targets.

“All of those things are important, but it’s client recruitment that would be most important to us,” Stevens added. “But having said that, all the other elements need to be “right”, especially the cultural fit piece.

“We generally focus on quality improvements via direct investment in the business, it’s people, processes and policies, etc. Acquiring to fix quality is generally a bad idea I think.”

In response to changing market demands, Brennan IT secured a 50 per cent stake in cloud and connectivity business, Fastrack Technology in February 2017, in a move designed to establish a “symbiotic relationship”.

Together, the businesses will blend complementary skill sets, pairing Fastrack’s focus on enterprise connectivity and Microsoft consulting, with Brennan IT’s mid-market expertise in the cloud, networking and infrastructure space.

Fastrack is a recent example of increased M&A activity taking control of the Australian market, with the channel carving out new ways to create market value in an increasingly competitive industry.

“I think the telco industry has done a good job of consolidating over the last five years,” Stevens observed. “But the IT industry is yet to do that, largely.

“However by the very nature of the market — low barrier to enter, new technologies developed quickly and lots of niches developed as a result — there will always be a steady stream of smaller new services companies.”

Buyer perspective

Naturally, buying a business involves conducting strict due diligence checks, including financial performance, operations and market potential.

For buyers, it means cutting through the hype to uncover the true value of a business.

“Apart from the usual of expecting too much money, every business generally says ‘we have special IP that makes us unique’ but they don’t,” Stevens said.

“We’ve completed a few acquisitions and it’s just inevitable that you will have good ones and
not so good ones. If you end up with a bad one then you need to decide if you stick with it or if you cut your losses and move on. If you’re moving on then do it quickly and get on with your core business.”

But as Stevens explained, sealing the deal is merely one part of the wider equation, with business integration an important aspect of any post-acquisition strategy.

“I think staff are the number one thing,” he added. “They will want clear direction and leadership which involves straight talking and no false promises.

“They will want to know if they have a job moving forward so that they can pay the bills, then they will be concerned about how this will affect their careers and their lives. You need to be open and honest with complete transparency.”

Reflecting Brennan IT’s core values of honesty, entrepreneurial spirit, teamwork, focus and passion, Stevens task for 2017 is simple — “we will keep acquiring, that’s for sure.”

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