BGH Capital to acquire Waterman Capital’s IT biz Fusion5
New Zealand private equity investor Waterman Capital has managed to reel in a blue-chip buyer for its IT services business Fusion5.
Street Talk understands Waterman is in the final stages of negotiations with Melbourne private equity firm BGH Capital with a deal set to be signed before Christmas. Sources said Herbert Smith Freehills has been on hand to advise BGH on the deal.
Fusion5 is the latest technology business to hit the auction block.
Waterman tapped Rothschild Australia’s bankers in June to test appetite for its majority stake in the Melbourne-headquartered business with price expectations around the $250 million to $300 million mark.
Fusion5 offers managed services, consulting, outsourced payroll, digital transformation and cloud solutions to more than 900 clients in sectors ranging from financial services to food manufacturing. The business has established partnerships with Microsoft, NetSuite, Oracle JD Edwards, IBM and Citrix.
Waterman bought a 55 per cent stake in Fusion5 in February 2021 and since then, has made several bolt-on acquisitions, nabbing NetSuite solutions provider Liberate IT in May and Microsoft practice Topaz Solutions in 2021. The bulked-up business was pitched to prospective buyers as a full-service IT business with a presence across Australia and New Zealand and about $25 million in annual earnings.
BGH Capital has form in the IT sector, making a chunky investment in deal-hungry cybersecurity company CyberCX in 2019. In four years, the business has swollen to over 1,300 staff and made at least seventeen acquisitions. Former Optus Business managing director John Paitaridis heads up CyberCX, with Alastair MacGibbon, the government’s former cybersecurity tsar, as chief strategy officer.
BGH Capital founder Ben Gray is close to ruling off another canny purchase. Nick Moir
The acquisition marks the end of a tough year for tech sector M&A. Vendors and their advisers know most tech investors have spent the past year putting out fires in their own portfolios – and naturally, they are wary of wading into new territory. As such, sexy metrics like annual recurring revenue multiples are out, replaced by old-fashioned yardsticks like profits and cash flow.
On the dealmaking circuit: Blackpeak Capital has been running a strategic review at remote software development company X-Team, Lazard has been running a sale process for a controlling stake in New Zealand SMS services technology platform Modica Group and information technology outfit Virtual IT Group has mandated boutique corporate adviser Allier Capital to help it vet inbound approaches.
Still, some deals have managed to make it through, Telstra snapping up cloud services play Versent in a $267 million deal in October.
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