$21 million payday for former Smart50 finalists Outware Mobile, as Melbourne IT snaps up majority stake

Outware Mobile founders Danny Gorog, Eytan Lenko and Gideon Kowadlo
Former Smart50 finalist Outware Mobile has sold a controlling stake in the $15.6 million app developing company to ASX-listed internet company Melbourne IT for $21.7 million.
Melbourne IT will acquire 50.2% of the shares in Outware Mobile, founded by Danny Gorog, Eytan Lenko and Gideon Kowadlo in 2009, with put and call options in place to give Melbourne IT the opportunity to acquire up to 100% of the company over the next two years.
Speaking to SmartCompany, co-founder Danny Gorog says the deal, which has been in the works for nine months, presents a huge opportunity for the two companies to take a further slice out of the local IT market.
โThe two main things in IT at the moment are mobile and cloud,โ Gorog says.
โWeโve done very well in the mobile market โ we are one of the most dominant players in Australia and have worked on some of the biggest apps in the country,” he continues, referring to clients including Seek, ANZ and the AFL.ย
“But when we think about the other half โ the cloud โ Melbourne IT have a really good track record in providing cloud solutions,โ he continues.
Gorog says Outware Mobile, which has a compound annual growth rate of 70%, is โexpanding as quickly as we canโ and โhiring as rapidly as we canโ to keep up with the current demand in the mobile market. He says the deal with give the company added resources.
โTalking to our customers, they say โcloud and mobileโ so we think the partnership made a lot of sense from a very high strategic level,โ he says.
โWhat this partnership is doing is putting two best degree Australian business [together] delivering high quality software and cloud solutions for our enterprise customers.โ
Outware Mobile is expected to contribute $3.1 million to Melbourne ITโs earnings before interest, tax, depreciation and amortisation, making the total transaction worth $67 million, with an EBITDA multiple of 8.6.
Itโs the latest purchase for Melbourne IT, which appears to be on an acquisition spree, after purchasing web service provider AussieHQ from Michael McGoogan for $15.5 million in February, a business the Canberra entrepreneur started in his bedroom at age 14.
Gorog says it was Melbourne IT that approached Outware, after the two companies had previously worked together on various projects.
โWe had worked with them in past and we really respected what they did and their capabilities and their values and their cultural identity aligned really nicely with us,โ he says.
He says Melbourne IT was attracted to the mobile capabilities Outware offered its enterprise services team, a relatively new and quickly growing part of its business.
โI think they saw a maturity and level of sophistication in the way we run the business and delivered projects which appealed to them.”
โThey are a large, publicly listed company, so itโs important to make sure any partnership is going to be a good one, so they did all their checks and balances and they were impressed.โ
Gorog says nothing will change from an operations perspective, with the three Outware founders to remain in their current positions as directors.
โItโs very exciting, itโs very rewarding, itโs very humbling in its recognition weโve built something of value,โ Gorog says.
And while Gorog admits the partnership will make the make Outware a formidable competitor in the Australian software market, he says itโs not about being the biggest player.
โItโs not about size or figures, itโs about making sure we are working on projects that are really challenging us delivering great software,โ he says.
Gorog says if business owners focus on building a strong business, rather than planning an exit, success will follow.
โI think sometimes when youโre starting a business you think about what an exit strategy looks like, but Iโd be lying to you if I said it was anywhere near the top of my mind [when we started],โ he says.
โWe really enjoy what weโre doing and got excited about the space and went from there.โ
โThese opportunities come around occasionally and you investigate them and consider them, and when you think it makes sense you act on them.โ