Telstra flexes M&A muscle to grow in consulting

They are typically about building up digital capability, which is a key focus for CEO Vicki Brady, who is also not scared of working more closely with big global software and digital infrastructure groups like AWS and Microsoft.

They are also not the bet-the-company type transactions that scare investors and can easily turn bad, rather adding scale to what it thinks is a proven opportunity and in response to customer demand.

M&A is key to growth

Versent ticks all those boxes.

And Telstra isn’t too proud to turn up to auctions, knowing its scale, funding power and potential synergies means it is going to be hard to beat for anything in Australian telecommunications or tech services.

The deal looks a lot like Telstra’s $350 million purchase of GP clinics and practice management software company MedicalDirector two years ago.

MedicalDirector was a big player in its market (No.2 in Australia), owned by private equity and was acquired to help Telstra expand its up-and-running health software segment in Australia and offshore.

Telstra’s other bolt-on type M&A deals in recent years include a controlling stake in Fetch TV ($100 million last year) and mobile phone shop Fone Zone (which ran Telstra-branded stores) for $110 million in 2021. None of them are game-changers for the $45 billion telco.

M&A has also been a big part of the Telstra Purple growth story. It is a roll-up of more than 10 acquisitions, most recently including Brisbane-based industrial automation group Alliance Automation and industrial wireless solutions group Aqura Technologies, both acquired early last year.

Deal brings ‘synergies’

Melbourne-based Versent, which is smack bang in the middle of the well-established adoption of cloud IT environments, is now part of the roll-up.

Versent CEO Paul Migliorini says his company’s board decided to go looking for a new investor or owner as it assessed how to fund mooted expansion, both in Australia and offshore. “There is a lot more scope for us to think bigger,” he says.

Telstra’s David Burns, who runs its enterprise business, said the acquisition supported the company’s wider T25 growth strategy, which is all about owning the network and technology solutions of the future and better customer experience.

“Versent will bring additional depth to our strong team of experts, help our enterprise customers maximise their investment in cloud-led transformations, and help us meet the growing demand for these specialised services,” he said, in a statement to the ASX.

He said there were “strong synergies” between Telstra Purple and Versent’s customer bases, its relationships with the big global cloud players like AWS and Microsoft, and team cultures.

The deal wraps up a nine-year ride for Versent, which was founded by former National Australia Bank operatives Thor Essman, James Coxon and Eddie Smith in 2014, who thought the way technology services were delivered needed to fundamentally change.

When The Australia Financial Review first wrote up Versent two years later, it was the company that had bootstrapped its way to $20 million revenue in 2015-16 and a 135-person headcount off its consultancy services, and gone all in on AWS.

Now it’s a $267.5 million takeover target and due to be folded into Telstra within six weeks. It has more than two dozen shareholders according to filings with the companies’ regulator, the biggest of which are entities linked to the founders. Part of its business is Stax, which Telstra described as a self-serve cloud management platform for enterprise and mid-market customers that helped them design, build and run their own cloud.