Vodat's acquisition of Cheltenham-based Cisco Gold Partner Axonex more than doubles the size of the business and according to Managing Director Neil Poultney his ambition to become a one-stop-shop for ICT technology has also redoubled.
Stockport-based Vodat's first acquisition is as much a statement of intent as a smart strategic move that expanded the business greatly overnight. It reflects the scale of Poultney's objective and ambitions, and also the company's ability to spot an opportunity and act on it, which has been evident throughout its lifetime. Vodat was first established in 2002 by the current senior management team and funded by former CEO Mike Bielinski. They saw a big opportunity to facilitate the potential for retail sector consumption of emerging technologies at the time.
"From the outset we knew that broadband would revolutionise what retailers could do in-store with IT," said Poultney. "In the early days it was viewed as a consumer product for Internet browsing. It certainly wasn't a technology that retailers, or any other sector, thought could be used for business applications. So like any fledgling business, in the early days it was all about survival - staying trading, getting to break-even and then into profit."
Bielinski left the company following a Maven Capital Partners backed MBO in 2012, led by Poultney. Maven is still Vodat's primary PE investor and it supported last month's Axonex acquisition. "Having worked with Mike for 20-plus years the MBO was an opportunity to step out from his shadow," said Poultney. "That was both exciting and frightening in equal measures. Five years down the line, to look at what we have achieved pre and post MBO makes me immensely proud."
Poultney's career in IT kicked off during the 80s when the PC came of age, and he witnessed first hand the transition from mainframes. "I was a field service engineer repairing EPoS cash registers which quickly became modified PCs," he stated. "I worked for a number of the major UK retail system houses. I'm an engineer at heart, which is a good foundation within IT and telecoms. Having worked my way through the ranks, I also have an appreciation of a range of roles across a company, which is invaluable, especially considering the change to our business following our acquisition of Axonex."
Pre-Axonex, Vodat registered circa 15 per cent organic growth per annum and generated around £10.5 million turnover with EBITDA of £1.15 million. "The acquisition of Axonex sees us double in turnover and profit to circa £22 million and £2.25 million respectively," added Poultney. "We now see group sales growing at around 20 per cent annually, with the incremental five per cent coming from cross sales."
The acquisition also boosts Vodat's headcount of 50 to 96, and the companies will continue to operate from their existing offices. "Joining forces with Axonex is a step-change for the business in many ways," stated Poultney. "But the real benefit is the extended solution set which is complementary and a natural extension to the solutions currently provided into our respective client bases."
The name 'Vodat' is a derivative of 'voice-data', and all of the firm's early networks were based on VoIP technology over a broadband network which generated a 12-18 month RoI. "That built trust in the technology and we quickly started to transition other business applications onto the network," added Poultney. "Fast forward 15 years, and it's now the de facto connectivity technology for retailers communicating with stores. But our early entry into the market and ability to put business class SLAs and failover on a 'consumer' product enabled us to create a niche and gain early market share in what was then a greenfield site for business class broadband networks."
Vodat's proposition has always been geared towards the mid-market retail sector. Similarly, Axonex's client profile is mid-market, although it has a wider sector reach. "The mid-market will continue to be our target, it's where we see our proposition adding real value," confirmed Poultney. "WAN connectivity for the retail sector has historically been our core capability, where we have created niche solutions and complementary value added services, such as voice, PCI, security, Wi-Fi etc. The Axonex acquisition gives us a natural extension in sector reach, and effectively doubles the product portfolio."
In 2009 Vodat implemented its own MPLS core network, a significant investment that became the technical foundation upon which to build a scalable business. "It also allowed us to differentiate commercially and technically from suppliers who didn't have their own core," added Poultney.
Another foundation stone for future growth was Vodat's strategic shift to cloud-based services, a move that also put a spotlight on the broad benefits of making acquisitions. "We could have continued to maintain our healthy 15 per cent year-on-year growth but that would become more challenging as the demarcation between WAN, LAN, server infrastructure and applications becomes blurred," explained Poultney. "That is both a risk and a massive opportunity. We recognised some time ago that while there is an opportunity to extend services to support that transition, to do it organically is slow, risky and expensive. So while we are always extending in-house capabilities, such as SD-WAN, security and IPT, we see the real opportunity to broaden that through acquisition and gain a greater share of the IT wallet."
The company's ambition is to become a 'true one-stop-shop' for ICT, noted Poultney. The plain fact is that businesses just want applications to work, whether cloud, on-premise or hybrid. The 'how' is almost of irrelevant, according to Poultney. And while connectivity speed, reliability and quality are becoming more important, the bigger opportunity is to provide a more comprehensive solution set encompassing connectivity, infrastructure, IT services and application hosting. "So we are always looking at how we can extend our offering with complementary solutions and services, organically and through strategic acquisition and partnerships," stated Poultney.
"The challenge and risk is developing capability quickly to maximise the opportunity, but not going too quickly that we lose sight of our values and product quality. There are lots of buy and build examples where the premise seems to be... make sure you throw more in the top than is coming out of the bottom, and exit before the wheels come off. We see an opportunity to build something much more sustainable and true to our values. To do it and do it well is without a doubt a big challenge, but one we don't underestimate.
"Organic growth, where it can be achieved, is still the best form of growth in my view. Strategic acquisitions provide an opportunity to accelerate that growth. So the evolution of cloud and the opportunity for Vodat to extend its capability forms the foundation of our strategy. Cloud adoption is widely expected to double over the next two years. It is happening by degrees and our opportunity is to continue to support the journey."
Another key component of Vodat's DNA and strategy is to provide best-of-breed solutions backed by stand-out service. "That is the cornerstone of our business and underpins everything we do," commented Poultney. "It's one of my personal mantras and I'm passionate about it more than anything else. True service excellence comes from your people, every customer touch point. So that is the primary facet of our culture, and we work extremely hard to maintain it."
The opportunity to provide a narrow solution set is becoming more limited by the day, and the blurring of lines between connectivity and infrastructure means businesses want trusted partners who can manage more of the overall solution. "Resellers and SIs therefore have to evolve with complementary solutions and services," commented Poultney. "A strong senior management team is key to being able to focus on looking forward. And good non-execs that challenge your business are worth their weight in gold."