Melbourne IT buys controlling stake in Australia's top cloud-based app developer, Outware Systems

Melbourne IT managing director Martin Mercer. Source: supplied

Melbourne IT has spent $21.7 million for a majority 50.2% stake in Australian cloud-based app developer Outware Systems (trading as Outware Mobile), with a two-year put and call option for the company.

The total transaction consideration is expected to be $67 million, implying a forward EBITDA multiple of 8.6 times. The final price depends on the financial performance of Outware Mobile over the next two years.

The company is Australia’s leading mobile app developer. It has 115 employees, with offices in Melbourne and Sydney, and a client base that includes the ANZ, Google, Telstra, Coles, and the federal and state governments.

Founded in 2009, Outware has seen a compound annual growth rate in revenue of 70%, allowing it to fund growth from retained earnings. In the 2014-15 financial year Outware Mobile’s forecast revenue is $15.6 million with an EBITDA of $5.1 million. It’s expected to add $3.1 million to Melbourne IT’s EBITDA in CY2015.

The acquisition is funded via new bank facilities, leaving the company with net debt of $22 million.

Outware founders Danny Gorog, Eytan Lenko and Gideon Kowadlo will remain with the business in their current roles.

Melbourne IT managing director Martin Mercer said the two companies share a number customers, so it was a good fit and the chance to leverage that base from both companies.

“Together we become the leading software enabled cloud solutions provider in Australia. Mobile applications are by their very nature cloud centric in their architecture. This acquisition makes perfect sense. It enables us to deliver a complete and comprehensive service and a compelling value proposition to the market,” he said.

The transaction is expected to be completed on 17 June.

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