ASG continues run of acquisitions, buys Capiotech for $30 million

The trend of acquisition in the IT sector continues with services group ASG completing its third takeover in as many months after buying business IT specialist Capiotech for $30 million.

It comes as a number of other companies, including M2, iiNet and UXL have continued to acquire smaller, niche-based firms in order to grow as the industry struggles to recover from the financial crisis.

The acquisition of Capiotech, a consulting group which focuses on services including data warehousing and IT support systems, will be completed in three stages with the firm to receive $15 million in cash and shares up front. The remaining $15 million will be split into two payments based on performance targets.

The deal comes after ASG purchased Dowling Consulting in April, along with the purchase of Courtland Business Solutions in April which provided a way-in for ASG into the mining industry.

Capiotech chief executive Steven Pennisi will stay on with the company. ASG chief executive Geoff Lewis said in a statement the acquisition has the possibility to significantly add to the company’s earnings during the 2011 financial year, with EPS accretion already set for 15%.

In ASG’s most recent financial report, the company said net profit after tax was up 32.5% to $6.5 million for the first half of the current financial year, while EBIDTA was up 14.5% to $10.4 million.

Additionally, while revenue was down 9.3% at the time to $58.2 million, the company said it had a strong balance sheet with solid cashflows and little debt. It also has contracted revenue of $450 million beyond the current financial year.

Lewis said in a statement the acquisition will allow the company to move into “high value service areas”.

“At the same time, we’ve invested heavily in our next wave of contract growth, with major wins in recent months with customers such as the Department of Prime Minister & Cabinet, Western Power and the West Australian Department of Education.”

The company has scored over $100 million in new deals since the start of the year, with a significant amount of it being IT administration for government departments.

“We are particularly excited about what we can deliver to customers such as Qantas, where ASG and Capiotech currently alongside each other and together can offer a stunning device offering for our client.”

Lewis also told The Australian the company would have about $7 million in debt by the end of June.

Capiotech, which has about 90 employees on the east coast, services customers including ANZ, Commonwealth, NAB, Vodafone and Origin Energy. ASG, which is based in Perth, said the eastern offices would provide solid expansion opportunities with a total headcount of about 800 following the acquisition.

Pennisi said in a statement the acquisition was a good fit, with the two companies having already worked together on various projects.

“We have a track record of working successfully with ASG in the past and believe there is a significant opportunity for the future growth of our businesses together. Working together, these complementary businesses can significantly grow their available market opportunity.”

Both companies were contacted for comment, but no reply was received before publication.


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