Ipex looking to grow to $500 million

PC assembly, integration and outsourcing services company, Ipex, has implemented a rapid growth plan that will endeavour to more than double the company’s revenues to $500 million over the next five years.

According to Ipex director, Yoav Schwalb, the company needs to bring in annual revenues of half-a-billion dollars to be a legitimate big end player in the outsourcing game where it now competes as a prime contractor. Meanwhile, Ipex also sees significant opportunities to expand into the small and medium enterprise space and it is in the process of acquiring the expertise it needs to get there.

“We think that for Ipex to stay competitive against the global players it needs to be a $500 million company,” Schwalb told ARN.

“We need to establish a size, a presence and an awareness in the market place that makes us a serious contender for the big contracts and that allows us to explore opportunities to apply our technical expertise, systems and processes in the small and medium enterprise space.

“Our view is that $500 million represents a threshold that we must meet if we are going to be seen in the market as being viable in the long term. We just can’t match it dollar-for-dollar with the big multinationals in terms of marketing unless we do so.”

With current revenues of “around $200 million”, according to Schwalb, clearly there is significant growth that is needed to achieve the target of being a half-billion-dollar player.

Schwalb said there was a three-pronged growth strategy but “70 per cent of the strategy planning” to achieve its revenue targets is being put into acquisitions.

“We have always had an organic growth agenda but we are seeing that that is getting harder and harder in terms of major impact to the organisation,” Schwalb said. “We are a very busy, successful company. It is very hard to introduce new agendas and new initiatives to the organisation.

“Finding mindshare to do that is hard and we are seeing that the cost of introducing organic growth is becoming higher and higher all the time.”

Schwalb said that “the obvious way to achieve critical mass is growth by acquisition” and that it wass “the right time to be acquiring” because “the market is down” at the moment.

“We see the opportunity now to significantly grow Ipex in the SME marketplace through acquisition,” he said. “It is very much going to be the chief growth driver for us here.”

Director of enterprise services at Ipex, David Cohen, said the company was “very cashed up” and there was a clearly defined profile of the types of companies that Ipex was looking to acquire.

They needed to be companies that are IT providers to customers in the 100-1500 seat range and that had a minimum of $5-8 million in annual revenues, according to Cohen.

He said they also needed to be companies that “really own their customers” and that “have a strong technical team”.

They will be of particular interest if they are in regional or suburban areas where Ipex does not already have a presence.

“The model is very much that we will take a position in the company so that there is some cash paid out to the proprietors,” Schwalb said. “They will continue to manage the company and we will start building a close relationship with them and partnering but they will retain their own identity. If the model is then successful, we will do a full acquisition and then merge the operation into Ipex.”

Cohen said that while he could not disclose names “there are a couple of companies that we are now in the process of acquiring” and that Ipex is looking at others.

In addition to organic growth and acquisitions, Ipex is also looking at a “softer” growth facilitator through “formulating the right kind of strategic alliances” with other channel companies and vendors. “In those areas where we can’t find companies to acquire then we will pragmatically develop strong partnerships particularly in the area of application development at the corporate end of town,” Schwalb said. “Over the years we have developed quality IP in relation to big HR and financial systems that has not been fully exploited.”

The only barrier that Cohen saw in the path of Ipex achieving its lofty growth ambitions was that many companies had “an over-inflated opinion of their current value” to potential acquirers.

“There are companies that are willing to be acquired and which need a capital injection but they are still living in the past,” Cohen said.

“They are looking at the profits they made three years ago and basing their calculations on that and not what is happening today.” Ipex’s operations include assembling 220,000 PCs and servers per year.

This was between 4.5 and 5 per cent of the market in Australia, according to Cohen.

It also has network integration operations, managed services and is the prime outsourcing contractor for the Federal Government’s Group 8 cluster of agencies.

Ipex also dabbles in video-conferencing, software development, education and professional services.

The company employs about 700 employees across Australia with 13 branch offices in all state capitals and major regional centres.