Arq Group has finally secured a buyer for its troubled Enterprise business, offloading the division to a consortium that includes Sydney-based investment firm Quadrant Private Equity for $35 million.
The consortium also includes certain members of Arq Group’s enterprise team, namely interim CEO Tristan Sternson and directors Justin Parcell and Cameron Boog.
The $35 million price tag is all in cash and is on a debt free basis. The proceeds from the sale will go towards paying down company debt and focus on managing cost and maximising value for the remaining SMB business.
The acquisition understandably means a big shake-up at Arq. Sternson will step down as interim CEO immediately and will be replaced by Brett Fenton, leader of Arq Group’s SMB division.
The acquisition also includes the rights to the Arq brand name and as a result, shareholders will vote on a resolution to change the company’s name at the next annual general meeting. The deal is not subject to any conditions, and is expected to be completed on 2 March.
Arq has been trying to sell either its enterprise and SMB businesses since September 2019 when problems with the former started to surface. The company announced via the ASX that anticipated EBITDA for FY19 had dropped from $12 - 45 million down to $1 - 2.5 million, due to an overhead structure that was impacting enterprise margins. Meanwhile, the SMB division is holding steady with EBITDA forecasted for $9.7 - 10.7 million.
Arq also revealed that there are still ongoing discussions with parties to sell the SMB business.
Chair Andrew Reitzer said Quadrant had a track record of acquiring “industry leading businesses and we wish the team every success in the future.”
“Decoupling Enterprise will allow for the team to focus on SMB, enabling it to deliver to its vision of being the most impactful digital marketing partner in Australia, unlocking the growth potential of local small and medium businesses,” said Reitzer.