m2 looking at big acuisitions-let fun begin

The ASX-listed telco has been on the Deloitte Technology Fast 50 list six times now, which is an amazing feat for any company. During Vaughan Bowen’s 12-year reign as CEO before he passed the torch, M2 has had a spectacular run.

The telco has seen profits soar. As Bowen stepped down in August, the company recorded a 75 per cent increase in net profits. A key component to M2’s phenomenal growth is its penchant for acquisitions which Bowen, now an executive of the company, is still keen to drive.

“Vaughan stepping out of the CEO role and into the executive director role gives him an opportunity to be undistracted to explore what is a myriad of opportunities on the mergers and acquisitions front,” Current M2 CEO and Bowen’s successor, Geoff Horth, said.

One might think M2 may, perhaps, be a little bit bloated from all the acquisitions it has already made.

It bought People Telecom in 2008 for $17 million followed by Commander’s SMB operations for $19 million in 2009 and Clever Communication’s reseller business in 2010.

And those are just some of the acquisitions the telco has made in the past few years. But it is determined to loosen the belt and continue eating.

That’s not to say M2 has trouble growing organically. According to Horth, its wholesale aggregation side has experienced consistent growth while its small business segment has really impressed.

“In the small business segment, we invested quite heavily in our channel programs and we have re-invented those on a number of occasions over the past three years,” he said.

“That has really given us that solid underlying growth rate that makes the acquisitions all the more meaningful because they really do contribute to the top line.”

The telco generally takes over businesses that are either distressed or struggling so it has to really work to makes the acquired assets worthwhile.

“There’s no secret science to our acquisition strategy to be honest,” Horth said. “It’s actually providing good levels of customer service and really trusting the incumbent management, giving them the tools they need to turn the business around on your behalf.”

This is because when M2 acquires a company, it inherits a large pool of existing staff and they are usually a group of very competent people, he said.

“We are very focused on removing any concept of victor and vanquished,” Horth said.

“We get in front of the people in the acquired businesses very early in the piece and we implement all the things we do in our own team in those businesses right from the outset.”

M2 also makes it a mission to reinvigorate the channel programs of its acquired companies.

With its acquisition strategy down to a fine art, M2 has set its sights for bigger and better things in 2012. It helps that the company has a robust balance sheet, very little debt and significant borrowing capabilities as well.

“One of the things we are conscious of doing is making sure the transactions we do are relevant,” Horth said. “You won’t see us doing a lot of purchases of $5-10 million businesses – we are looking slightly higher up the food chain now.

“There are some assets that have come onto the market that are potentially up to 50-60 per cent the size of our own current business and we will be looking at those opportunities.”