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Why did AC3 buy Bulletproof?

Why did AC3 buy Bulletproof?

Sydney-based technology provider sheds light on an acquisition finalised following a six-month bidding war

Simon Xistouris (AC3)

Simon Xistouris (AC3)

Credit: Christine Wong

A desire to become one of the leading hybrid cloud partners in Australia was the main motivation behind AC3’s decision to acquire Bulletproof.

With the dust, and delisting, now settled on a deal amounting to $24.7 million - with shareholders receiving 15.2 cents per share - the Sydney-based technology provider has shed light on an acquisition finalised following a six-month bidding war.

And this was a war, with Macquarie Cloud Services outmaneuvered to the tune of around $6.8 million in market dollars, following the submission of a $17.9 million offer.

But that is now old news, consigned to the annals of channel history as yet another multimillion-dollar acquisition signs on the dotted line.

Looking ahead, for AC3, it appears the sky’s the limit in every sense of the meaning.

“We believe that our businesses complement each other very well as our core strengths are in two different areas of cloud technology,” AC3 CEO, Simon Xistouris told ARN. “We anticipate this allowing us to deliver even more value to our combined customer base, as well as positioning us as the true hybrid IT partner in the industry.

“The public cloud market is booming and we only see this growing, but the private cloud market isn’t going anywhere anytime soon either.

“There is space in the industry for a partner of our size who can offer exceptional solutions and service in both of these areas, to be the ‘go to’ when a customer needs a solution, whether it be public, private or something in between.”

Booming, the public cloud market is, with Australian spending expected to grow by 18.5 per cent year-on-year in 2018, reaching $4.6 billion in the process.

According to Gartner research, the bulk of local public cloud services spending is expected to centre around software-as-a-service (SaaS), which is also the fastest growing segment at 24.4 per cent in 2018.

“Bulletproof is an end-to-end cloud services partner, with both public and private cloud expertise, but their value proposition to the market is centred around public cloud, particularly Amazon Web Services,” Xistouris explained.

“A key part of their value proposition lies in the digital transformation they can deliver for businesses using AWS with their DevOps and agile enablement consulting. This is a perfect example of IT driving business outcomes.”

The deal, in essence, represents a marriage of cloud capabilities, with AC3 leveraging expertise within the private cloud domain, backed up by managed services, project services, procurement and talent management, specific to NSW Government.

Meanwhile, Bulletproof - which became the first pure-play cloud services provider to list on the ASX - is widely recognised as specialists in mission-critical public cloud services.

“We plan to bring the best of both businesses together to create what we believe to be Australia’s leader in hybrid cloud solutions,” Xistouris added.

“Bulletproof has a large and mature practice around public cloud, DevOps and Agile enablement consulting so this is really the key area that we intend on leveraging to add immediate value to the AC3 client base.

“There’s a lot of discussion within government at the moment about public cloud so this is perfect timing.”

Bulletproof specialises in migration, strategy and optimisation in the context of cloud, in addition to advanced capabilities across AWS and Microsoft Azure platforms.

Xistouris said both parties have “existing partnerships” with the market’s leading cloud providers - in AWS and Microsoft - alongside a number of other strategic vendors in Australia.

“We’ll look to bring these under one umbrella,” he said. “This acquisition is about growing our business and service portfolio, so I see our current vendor partnerships strengthening through this process.”

Customers

Once AC3 was made aware that Bulletproof was on the market, Xistouris said the business conducted internal due diligence, looking at the opportunity from “every angle” before making a “logical decision” based on the numbers.

As reported by ARN, the combined entity will serve over 700 customers and employ more than 330 people, irrespective of Bulletproof’s move in February last year to cut 30 employees as part of cost-saving drive.

Simon Xistouris (AC3)Credit: Christine Wong
Simon Xistouris (AC3)

Key Bulletproof customers include Big W, Crestone and Nova Entertainment.

“Our message to the Bulletproof customer base is simple; you can expect us to deliver exceptional service by leveraging our combined talent pool,” Xistouris added. “Over and above this, we will be introducing a number of new services that AC3 has proven capability to deliver.

“AC3’s value proposition is around building true partnerships with our customers, it’s all about the people and having a deep understanding of our customers and what they are trying to achieve.”

According to Xistouris, the benefits for AC3’s current customers will be “far reaching”, with acquisition viewed as a way to enhance in-market capabilities.

“The Bulletproof acquisition will help us expand our service offering which means we can add more value to our customers,” Xistouris explained.

“The most obvious benefit is immediate access to a technically brilliant complement of public cloud solution architects, engineers and support people, all through their existing trusted partner.”

Integration

With Bulletproof now delisted from the ASX, Xistouris’ next goal is to retain as many of the existing team members as possible, in a bid to build on the foundations currently in place.

“One of the many reasons that Bulletproof was appealing to us is the complementary nature of the business, so we have very limited overlap with our people,” he said. “There will always be overlap at management level in these situations and that’s a conversation that has been ongoing.”

At this stage, the intention is to bring the two businesses together as one, to avoid losing opportunities for synergy post-acquisition.

According to Xistouris, creating a combined entity will provide customers with a “seamless experience” when leveraging both skills sets, with plans also in place to source a new Sydney office to house staff.

“This is one of the questions I am asked most by our people,” Xistouris added. “AC3 is currently in the Australian Technology Park and we have a rich history here, which we would love to maintain, but our business is growing too quickly for that to be an option.

“With the addition of the Bulletproof team, we plan to find a brand new location that will fit everyone. We are already strategising about office space and location and the only answer I have right now is that we know we want everyone in one place. The real estate hunt continues.”

The business also inherits a New Zealand operation, following Bulletproof’s acquisition of Cloud House in January 2016, for NZ$1 million upfront with a further NZ$4.2 million in cash to be paid upon meeting performance targets by 30 June 2017.

Such performance targets are however, a bone of contention between both parties, which has resulted in ongoing legal action in Auckland.

“Yes, this is a matter that is current being heard before the courts but does not have any impact on the acquisition,” Xistouris clarified. “This is, however, something we will need to manage once we take full control and was fully considered during our due diligence process.

“While AC3’s focus has primarily been in NSW, especially with our history in state government, we’ve always had clients dotted across Australia and New Zealand.

“Bulletproof’s client base is much more geographically dispersed, spanning across Australia and New Zealand so we see this as a great opportunity to expand our physical presence in New Zealand, as well as in Sydney and Melbourne, with local teams.”

AC3 runs on a 24-month planning process, with the business about to reach the end of another cycle, triggering the Bulletproof acquisition as a result.

For this deal was all part of a wider strategy, with plans now in place to move through the integration process before rebooting and reseting for 2018 through to 2020.

“We need to digest this acquisition first,” Xistouris said. “Effectively we will now have access to over 700 customers across A/NZ, which will create many opportunities. Our key focus will be cross and up-selling our services to this new pool of customers.”

And will another acquisition be on the cards?

“Never say never,” Xistouris added. “Right now our key focus will be integrating the two businesses and we want to do it right; for the sake of our people and our customers. Acquisition will continue to play a part in our growth strategy moving forward.”


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Tags governmentCloudMicrosoftprivate cloudAmazon Web Servicespublic cloudac3BulletProof

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