Adelaide middleware developer Steadycom was last week acquired by listed telecommunications provider Pracom for $60 million.
The deal comprises $15 million in cash and 37,190 shares at an issue price of $1.21 each, subject to shareholder approval.
With customers like OneTel and Vodafone on its books and development partnerships with Compaq and Intel, Steadycom proved an attractive company for Pracom, who most appreciated the developer's international potential.
"They saw that our product has a lot of possibilities and would allow them to branch out," said Robert Brady, a director of Steadycom, who estimated that Steadycom's earnings before tax for the next financial year would be in excess of $8 million.
Steadycom's middleware is used to develop telecommunications switching applications, including voice recognition technology. Pracom will take the technology into the enterprise space, as well as Steadycom's traditional telco market, actually reselling Steadycom solutions alongside its telecommunication products.
As well as this market expansion, Steadycom will benefit from Pracom's marketing expertise, which is a foreign concept for a company reliant on word of mouth. "Marketing and sales (expertise) is absolutely the one thing we have never had. In the last three years we have put all of our energies into developing our code," explained Brady.
The combined company will also look at establishing a direct presence in China and the US some time in the near future, according to Brady.
"In some markets you just have to have a ground force and Pracom have more experience than our zero in this area," he said.
The deal comes at a time when Steadycom's three directors, Greg Steer, Richard Clark and Brady, were gearing up for an IPO later this year. "We were looking to list but then a couple of companies came looking at us," Brady said.
"Pracom were our clients so we knew them and they knew us and our products pretty well. They had a team of 10 application developers working to write applications on top of our code. That's more than we have. And they saved us doing a lot of work in terms of us preparing to list. It was always a fifty-fifty choice between listing and this (being acquired)."
Steadycom will retain its own identity, receiving only loose guidance from headquarters, according to Brady. Management will also remain stable and staff numbers will increase dramatically from about 20 to 100 in 18 months.