Tomizone Limited (ASX: TOM) has finally identified the New Zealand managed services and internet service provider (ISP) it struck a deal to buy in February, naming Sweep Internet NZ Limited as its next acquisition.
The Australian-listed managed services provider confirmed with shareholders on 11 May that it had completed its due diligence on the proposed ISP acquisition it announced in February, with a sale and purchase agreement having now been executed with Sweep Internet NZ Limited.
As noted by ARN in March, Sweep Internet had previously been identified as a likely contender for Tomizone’s then unnamed acquisition target.
Based on Auckland’s North Shore, Sweep is a family-based company, until now wholly owned and operated in Auckland. An Avaya partner, the company has made a name for itself as an ISP and telephony supply and support company.
Sweep has a pre-existing key partnership relationship with the digital communications software and services vendor. As part of the acquisition deal, Tomizone will enter into a similar partnership agreement with the vendor that will license Tomizone to provide ongoing support and sales of Avaya products into the NZ market.
“This provides Tomizone with access to larger customers with upwards of 1,000 extensions and a consistent revenue stream,” Tomizone told shareholders in a statement.
As previously announced by the publicly-listed company, Sweep forecasts its revenue to be A$1 million for the next calendar year, with potential for more growth once synergies are implemented including cross selling of the new services to existing Tomizone clients.
According to Tomizone, the company has an existing customer base with ongoing recurring revenue streams, and generates profit of around NZ$150,000 per year. Combined with cost savings, it is thought the combined company will provide to Tomizone with a return on investment is expected to be less than two years.
The deal is worth an initial purchase price of NZ$350,000 and an additional two-year earnout, by way of Tomizone shares, as consideration for the acquisition, with the Sweep owners set to join Tomizone in senior management roles.
Specifically, Sweep director Andy Woods will join the group as CTO, while fellow director Chris Lang has been appointed divisional manager of the group’s ICT/VoIP division, with specific responsibility for growing that division of the Tomizone business.
The deal is part of Tomizone’s broader strategy to become a full-blown MSP on both sides of the Tasman. The company was founded in 2006, making a name for itself as a provider of connectivity, analytics, monetisation and location-based services to enterprises and public venues.
In 2017, the company boosted its core service offering, becoming a full-scale managed services provider in the process.
Much of the company’s MSP retrofit came as a result of strategic acquisitions, with its expansion of capabilities being supported in part by its acquisitions of Bluesky Online and Ironman, also based in New Zealand, in 2017.
The latest acquisition deal remains subject to Australian Securities Exchange (ASX), bondholder and shareholder approvals. It is expected the transaction will be finalised for approval at a shareholders meeting scheduled for June 2018.