Listed domain name registration company Melbourne IT has acquired Australian competitor NetRegistry for $50.4 million.
Melbourne IT announced the deal as part of its half-yearly results yesterday, when it posted a net profit of $6.2 million and revenue of $103 million.
The companies have long been rivals in the field, but synergies between the visions of NetRegistry chief executive Larry Bloch and acting chief executive of Melbourne IT Peter Findlay saw the two companies decide to “move forward together”.
The deal brings together two of Australia’s leading web-services firms, as the businesses hope the acquisition will provide greater propensity to scale and diversify.
Get daily business news.
The latest stories, funding information, and expert advice. Free to sign up.
Bloch told SmartCompany that he and Findlay started talking about the deal late last year.
“We’ve had a number of conversations over the years about opportunities to consolidate in the market,” he says.
“Through discussions principally between myself and Peter Findlay, we developed a common vision of how the companies should merge. It was really the relationship between the two of us and this common vision which saw the deal eventuate.”
The deal has predicted annual cost synergies of over $5 million by 2015 for the companies and Bloch will join the Melbourne IT board.
NetRegistry has been operating since 1997 and was co-founded by Bloch.
“In my view the market is globalising, as are many markets and in our sort of company, scale is important and this is just a natural progression in the Australian market,” Bloch says.
“The Australian market tends toward duopolies and we’re both strong competitors along with some other international firms.”
Bloch says in the long term the company intends to consolidate its technology backend, reduce the number of data centres and increase its overall share of the market.
“We could even merge the two brands overtime. There are opportunities in due course to consider a consolidated brand strategy for the two businesses and there are lots of upsides in terms of revenue, products and improving the capabilities of the businesses,” he says.
“In the short term staff and customers will see very few changes. We have a very deliberate view of how we want to proceed and there are no big job cuts, it’s an evolution to a shared vision. Ensuring customers are not disrupted is of paramount important.”
Bloch says the companies share some strengths, but on others they hope to “cross-pollinate”.
“We know each other quite well as companies and there’s not that great a difference between fierce competitors and kinship,” he says.
“This was a matter of natural progression. The message for customers is that NetRegistry customers will continue to be served by the same platform as they have in the past and we hope to bring improvements from the strength of Melbourne IT and vice versa.”