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People vs Product - A tale of two Aussie mergers

People vs Product - A tale of two Aussie mergers

Despite an infinite amount of reasons behind why businesses pursue merger talks, it essentially always boils down to two considerations.

“Most of this stuff is opportunistic at the start and you end up with a foundation customer who believes in you and your people and comes to you with an idea they want help to develop. We work hard strategically to find an end-user to be that foundation customer.”

People

On the other side of the merger coin, there are those companies which look to merge for scale.

Specifically, such partners are looking to expand geographical reach or customer base and require on-boarding of additional people to achieve growth targets.

Powernet IT Solutions has such ambitions for expansion. The Melbourne-based company’s main presence is in its home state but growth plans are also underway across Sydney and Brisbane offices.

“Our main driver was that we were looking to grow and have been looking to grow our business for some time,” Powernet IT director Daniel Williams said.

“We have fairly ambitious growth targets and for it to be realistic and for us to achieve those would be through merger or acquisition.

“Our organic growth was pretty good, but wasn’t good enough to scale the heights we wanted to.”

At the same time, an education focused partner in Melbourne, Virage IT, was also looking to expand and having known the team at Powernet, the businesses began initial discussions.

“We had previous dealings with Powernet over the supply of a software product they used,” Virage IT managing director Paul MacNeill added. “We had a good working relationship and for us that was one of the critical things that we were looking for.

“From that point forward we began working together on several projects where, for example, we may have needed resources in another state which Powernet could provide. Getting a few runs on the board was a way of validating that the two businesses could work together.”

According to MacNeill, this lead an informal partnership where the companies collaborated on several projects over a 12-month period.

In addition, Williams said a key deciding factor in going through with the merger was a value- based alignment between the two organisations.

“When you are working with someone, you get a pretty good idea quite quickly if you share the same values and have the same things that are important,” he said.

Due to the goals of both organisations during the merger, having a collegial working environment was crucial to the success of the combined entity.

Therefore, working together on many pilot projects was an important part of the process.

Paul MacNeill - Managing Director, Virage ITCredit: Supplied
Paul MacNeill - Managing Director, Virage IT

“Through the informal process of working together, we understood how everybody’s teams work and how they interact in those businesses, which is rare,” Williams added. “It definitely kept the lines of communication open, pre-merger.”

Despite being a stalwart in the industry for 23 years, Powernet had not chosen to concentrate on any vertical.

However, Virage had carved out a niche in the education sector around services which Williams cited as another attractive aspect of the merger.

As a result, the combined entity now has a specialised education practice and broader reach in Victoria and other states.

“The merger has grown our Melbourne office quite considerably and their continued growth in other states is something we had never stopped doing but Sydney and Brisbane are particular focus areas for us,” Williams added.

For Williams, the support systems in both organisations also received a considerable boost following the merger due to the ability to share resources.

“That gives us confidence to take that and build on it,” he said. “We have had some success recently with some projects in NSW and on vendor alignment.”

The early success of the combined entity has solved a problem that many merged entities struggled with, a name.

Williams and MacNeill said that after only a short time the team had decided the entity should be called Powernet IT Solutions, a decision that was reached almost unanimously.

But in looking ahead, the new entity has no desire to rest on its laurels and holds ambitious growth targets for 2017 and beyond.


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