Cirrus Networks (ASX: CNW) has struck a deal to acquire Canberra-based systems integrator, Correct Communications, in a share purchase agreement set to be worth up to $5 million.
Founded in 2010, Correct Communications has made a name for itself providing networking, storage, security and unified Communications infrastructure to Government and large enterprise customers in the Canberra region.
The company counts Microsoft, Cisco Hewlett Packard Enterprise (HPE), VMware, Palo Alto Networks and NetApp among its vendor partners.
The acquisition of the IT services provider is expected to give Cirrus a full service IT services and managed services offering in Canberra, and a new impetus to push into the lucrative public sector market.
Specifically, it is anticipated the deal will see Cirrus Networks accelerate its growth in Canberra, enhance its capability by combining Cirrus’ Cisco Gold accreditation, and offer government panel access.
“This is a key acquisition for Cirrus addressing a number of our strategic focus areas while accelerating our greenfields Canberra operation,” Cirrus managing director, Matt Sullivan, said. “The excellent standing of Correct Comms as a leading service provider will complement our panel status as well as our Cisco Gold and Managed Services offering.
“We are excited at the opportunities this presents for clients, staff and shareholders and are delighted to welcome Andrew and the high quality Correct Comms staff to the Cirrus Group,” he said.
The acquisition will see the current Canberra business of Cirrus Networks integrated with Correct Communications to form a much larger services and managed services-focused Cirrus Canberra business.
Correct Communications founder, Andrew Weir, will also join the executive team of the expanded Cirrus Group and continue to lead and grow the Canberra business.
Under his guidance, Cirrus will aim to quickly establish itself as the market leader in Canberra for innovative solutions and technical excellence.
“This is an exciting phase in the short successful history of Correct Comms,” Weir said. “Being part of the Cirrus Group will significantly increase our addressable market with Government panel access and Cisco Gold Accreditation while providing a platform for new and innovative solutions across the services and managed services markets.
“Being recognised for our customer focus and technical excellence, this provides further opportunity for our high quality staff and loyal clients,” he said.
Correct Communications had FY17 earnings before interest and tax (EBIT) of $676,000 on total unaudited revenue of $11.5 million, which highlighted a doubling of its services revenue each year for the last two years.
The terms of the agreement sees Cirrus buy 100 per cent of the share capital of Correct Communications, with a minimum purchase price of $2 million and a maximum of $5 million.
The purchase price comprises two tranches. The first tranche sees $1.5 million in cash on completion and $500,000 in certain shares to be issued at the end of FY18.
The second tranche will depend on the EBIT multiple result being greater than $2 million and will be calculated after the release of the audited FY18 full year financial results.
While the agreement is subject to a number of conditions, the acquisition is anticipated to be wrapped up within 30 days.
As recently as August, Cirrus flagged plans to continue assessing strategic geographic and competency-based acquisitions after coming off a strong 2017 financial year.
In March, the publicly-listed company struck a multimillion-dollar deal to acquire Victorian IT solutions provider, NGage Technology Group.
That deal saw Cirrus Networks buy 100 per cent of the share capital of NGage Technology Group for a total of $2.5 million, comprising of $1.5 million in cash and $1 million in Cirrus Networks shares to be issued on completion, and escrowed for two years.