Web hosting company Melbourne IT to acquire digital marketing agency WME Group for $39 million

Melbourne IT, the ASX-listed web hosting business, has announced its intent to acquire digital marketing agency WME Group for $39 million to further the growth of its small business (SMB) division.

The acquisition will be funded through $9 million in debt funding and a raising of $30.7 million, with the buy expected to add $7.5 million to Melbourne IT’s underlying earnings for the current financial year.

The company earlier this year completed the acquisition of Outware Systems for $57.84 million, and that of Infoready in early 2016 for $15.4 million to boost its Enterprise Services division.

Martin Mercer, CEO of Melbourne IT, said WME Group is a “logical and strong strategic fit” for the company given managed marketing solutions are the growth engine for its SMB division.

“We expect this powerful combination will enable us to grow [average revenue per user] at faster rates through enhanced cross sell and customer retention, as well as boost critical capability in search engine optimisation solutions and advanced customer account management,” he said.

Founded in 1996, Melbourne IT reports that its SMB division, operating under brands including Melbourne IT, WebCentral, and Netregistry, has over 450,000 direct customers and provides services to over 700,000 Australian businesses, generating over $90 million in revenue.

Its Enterprise Services division, meanwhile, has revenues of over $70 million.

As part of the acquisition, WME Group’s key management will remain with Melbourne IT.

Having launched the company out of his bedroom with $400 in 2008, founder Nick Bell said the time was right for him to exit and hand over the reins to Melbourne IT now, explaining it was important to him the company was left in the hands of people who “genuinely want to continue its growth”.

“I have a number of other business interests both in Australia and overseas which I want to turn my attention to and help achieve the same growth that WME did,” he said.

“I am also excited by the potential Australia is showing in providing the foundations for high-quality startups and want to become significantly more involved in nurturing and investing in the talent and ideas we have in our own backyard.”

Also founder of app development company Appscore, Bell has invested in startups including Ideapod, Leadchat, and social influencer platform Tribe, which recently expanded to the UK.

Image: Nick Bell. Source: Supplied.