NCS announced its acquisition of digital services firm ARQ Group (ARQ) in Australia for A$290 million ($297 million). This move brings to scale NCS NEXT in Australia, which now offers a compelling end-to-end digital transformation value proposition for clients.
ARQ’s revenue is projected to reach A$118 million by end 2022 representing a y-o-y increase of 38%, while EBITDA is projected to increase to A$18.4 million. The acquisition price represents an EV/EBITDA multiple of 15.7x, reflecting NCS’ confidence in the prospects of ARQ and expected synergies with the rest of its operations.
NCS believes that this move is timely and will accelerate its digital sector growth in Australia. This move comes at a crucial point to consolidate IT and digital resources at a regional level across Singapore and Australia for a strong partnership ecosystem, to more successfully support enterprises’ growing demand for digital transformation solutions.
Research by the IDC Worldwide Black Book has shown that digital services in APAC are expected to grow at a compound annual growth rate (CAGR) of 14.6% from 2020 to 2025, reaching US$170.6 billion in 2025. In Australia, digital services stand to grow at a CAGR of 8.7% from 2020 to 2025 to US$12.1 billion in 2025.
This is NCS’ fourth investment in Australia over the past 15 months. NCS recently acquired Australia’s largest privately-owned IT services company, The Dialog Group (Dialog) following two previous investments: firstly, cloud consultancy Riley that specialises in Google cloud applications and secondly, a majority investment in cloud transformation specialist Eighty20 Solutions.
ARQ’s client coverage serves half of the top 20 companies on the Australian Exchange (ASX) across diverse sectors in financial services, utilities, retail, healthcare, travel and government, including NZ bank, AustralianSuper, Domino’s, Qantas, Transurban and more.
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With the acquisition, ARQ’s 560-strong team will increase NCS’ headcount in Australia to 1,900, in a bid to build up a robust tech talent pipeline moving forward.
According to NCS, the foci of strong digital talent for both companies are aligned with each other, where NCS’ prioritisation of apprenticeship-based learning culture and ARQ Academy’s emphasis on self-learning and innovation provide a combination to better address the tech talent crunch in both Australia and Singapore.
Following the receipt of regulatory approvals required, the acquisition is expected to be completed by May 2022.
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“This latest acquisition completes a jigsaw of strategic investments in Australia, ramping up our presence in a market that is critical to our regional expansion,” says Ng Kuo Pin, CEO of NCS.
“Combined with Dialog’s core IT capabilities and extensive reach across eight Australian cities, ARQ brings on board the right digital competencies that help create a highly compelling end-to-end digital transformation value proposition,” he adds.
As at 2.59pm, shares in Singtel are trading at 2 cents down or 0.75% lower at $2.63.
