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Private equity firm Arq Group’s 300pc tech company transformation

“[Now] we’re the only Australian company that can provide everything in the digital space. We’re building technology in Australia and supporting it in Australia … a year ago it was more of a consulting, corporate-focused enterprise. Now we’re building solutions and lots of products as well.”

In addition to lifting earnings 300 per cent, the business has added $15 million in revenue since the acquisition, despite cutting some of its older services.

Once the problem child of the merged Webcentral/Arq Group business, in the most recent financial results prior to the acquisition – the January-June 2019 half-year results – the company said a “shortfall in new business” had triggered a 48 per cent revenue slide in the enterprise division. This was what Quadrant went on to acquire, along with the naming rights.

Currently, the company is developing digital twins technology (virtual replicas of physical buildings or devices), and last year did a project for a major insurer developing an AI tool for handwriting analysis.

It has also committed to having “$1 million of resources on the bench” (people able to jump on a new project) to service demand for cloud migrations at any time.

“We’re also investing in our partnerships with Amazon and Microsoft and working to rebuild our reputation a bit in the market,” Mr Sternson said.

Since the Quadrant deal, the performance of Arq Group has seemingly exceeded that of its former counterpart, Webcentral, whose revenue fell to $31.5 million in the six months ended December 31 from $36.9 million in the year-earlier period.

Webcentral is now also set to be acquired by 5G Networks.

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Chris Hadley-led Quadrant has also acquired businesses such as Darrell Lea, Rockpool Dining Group, Fitness & Lifestyle Group and it has bought a majority interest in smartphone mounting company Quad Lock.

Diaxion deal

The next chapter of Arq’s growth comes in the form of the acquisition of IT consultancy Diaxion, which predominantly operates in the federal government market.

It employs fewer than 40 people, but Mr Sternson said it was involved in “high level” government projects, which are challenging to win.

“There’s a huge need in federal government for Australian businesses to build and service their needs and Diaxion is really well known in this space,” Mr Sternson said.

In the next three years, Mr Sternson wants the business to have expanded throughout Australia and New Zealand and bulked up its workforce from its current headcount of about 400 to more than 1000.

He also said he has a focus on driving profitable growth, and some of this would come via further acquisitions.

“We were a business that wasn’t making much profit, or almost any profit, so we want to be making money as we roll up other businesses as well,” he said.

“We’re looking at [acquiring] some other businesses on the frontier of tech,” Mr Sternson said. “We also want to grow at a 20 per cent annual growth rate.”


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