Its majority owner, Waterman Capital, bought a 55 per cent stake in February 2021 when Fusion5 was making about $100 million revenue and employed 470 staff. Its co-founder, Matt Riley, sits on Fusion5’s board. The private equity investor has taken Fusion5 down the bolt-on path during its stay on the register, acquiring NetSuite solutions provider Liberate IT in May and Microsoft practice Topaz Solutions in 2021.
Valuations on revenue multiples? No, thanks
It’s ready to show the bulked-up business to prospective buyers, just as comparable tech businesses hit the dealmaking circuit again after interest rate hikes took the steam out of valuations. Biggest of the lot is Melbourne cloud specialist Versent via Goldman Sachs, followed by remote software development business X-Team via Blackpeak Capital.
There are two reasons why the Fusion5 sale is of particular interest. First, Waterman Capital has a history of reeling in blue-chip buyers for its exits: global giant Dai-Chi Life Holdings bought its insurer Partners Life; KKR’s Busy Bees bought its Provincial Education Group; and in 2008, Toll Holdings acquired its Australian freight forwarding business Gluck.
Second, despite the revival in tech sell-sides, we are yet to see a chunky deal get consummated. Vendors and their advisers know most tech investors have spent the past year putting out fires in their own portfolios – and naturally, they are wary of starting new ones.
That means valuations based on sexy metrics like annual recurring revenue multiples are likely to become a relic of the zero-interest rate era. Instead, the yardstick for the latest crop of tech sell-sides would be old-fashioned metrics like actual profits and cashflow.