Telecommunications innovator Vonex Limited (ASX: VN8) has agreed to acquire 100% of the shares of Network Technology (Aust) Pty Ltd as OntheNet for $9.6 million.
“This is a highly strategic acquisition for Vonex. It expedites our plan to diversify our product suite, in particular adding market leading data network services,” Vonex Managing Director, Matt Fahey, said.
“OntheNet is a high-quality telco business that delivers data network, voice and hosting/colocation services primarily to business customers. Both businesses strive for excellence in customer service, with an excellent cultural fit.
“We are very excited to welcome the talented and highly specialised team from OntheNet to Vonex and look forward to a positive 2023 financial year, as we continue to execute our strategy for organic and inorganic growth.”
About OntheNet
Founded in 1994, OntheNet provides data network, voice and hosting/colocation services primarily to business customers across Australia. The Acquisition will materially widen Vonex’s product capability, bringing ownership of its fully redundant core network, peering at major Australian Internet Exchange Points (IXPs), and a Tier 3 Data Centre located on the Gold Coast. OntheNet has a highly skilled workforce of 35 employees, including a large engineering team with strong capabilities in data networking.
In FY22, OntheNet delivered revenue of $15.2 million of which approximately 97% is recurring in nature and recorded pro forma EBITDA (unaudited) of $1.9 million.
The Acquisition significantly expands Vonex’s data network capabilities and introduces a new product offering through colocation and hosting. The limited overlap between product bases provides a clear opportunity for cross-selling. The chart below outlines the combined FY22 pro forma revenue mix post Acquisition.
Strategic Rationale
- Acquisition positions Vonex as a diversified telco with a significant opportunity to cross-sell additional services to Vonex’s customer base.
- High quality earnings providing a significant step-change in annualised recurring revenue (ARR) which will grow to ~$51 million post completion.
- Significant opportunity to realise future synergies through ownership of core network.
- Acquisition is accretive to Vonex and provides significant free cash flow to the combined group with OntheNet EBITDA to FCF conversion of >90%.
- Execution of Vonex’s disciplined M&A growth strategy, at a valuation that is consistent with previous deals representing an acquisition multiple of 5.1x OntheNet’s pro forma EBITDA of $1.9 million.
- The Acquisition of OntheNet increases the Company’s ARR by 40%, accelerating Vonex’s growth trajectory and scale.
