The Telstra Group Ltd (ASX: TLS) share price is under the spotlight today after announcing it’s going to buy a cybersecurity business called Versent.
Telstra to acquire Versent
It intends to buy the ‘technology consultancy’ business Versent for $267.5 million to help grow its tech services business called Telstra Purple, increase its network-attached storage (NAS) and “support the digitisation of businesses and Australian industry.”
Versent has a team of more than 500 experts that works with over 40% of the S&P/ASX 100 [XTO] (INDEXASX: XTO) to “transform their businesses through cloud technology, offering both professional and managed services”, as well as with AWS, Microsoft Corp (NASDAQ: MSFT) and leading security and data vendors.
The acquisition includes Stax, a subsidiary of Versent, which provides a self-serve management platform for enterprise and mid-market customers to “design, build and run their own cloud.”
Completion of the deal is expected to occur within the next six weeks and is still subject to various conditions being met, including “certain securityholder processes.” I’m curious to see whether the Telstra share price rises as a result of this deal.
How much money does Versent make?
In FY23, Versent achieved $130 million of net revenue, which meant it had achieved a compound annual growth rate (CAGR) of 17% between FY20 to FY23.
Why buy this business?
Telstra explained that it’s seeing growing demand for technology solutions, particularly in cybersecurity and cloud-led transformation, as enterprises, governments and whole industries digitise their operations.
This latest acquisition adds onto previous acquisitions made by the business, including Alliance Automation and Aqura Technologies, which are helping Telstra Purple’s capabilities.
David Burns, the executive of the Telstra Enterprise division, said Versent helps support Telstra’s T25 growth strategy. He said:
We see strong synergies between Versent and Telstra Purple in our customer base, our strategic partners, our team cultures and the way we tackle customer problems with technology solutions. And like Telstra Purple, Versent also has an international presence, particularly in south-east Asia, which provides significant potential to grow sales of international and Australia-out digital transformation services.
We’re excited by the growth potential this acquisition provides – it will further differentiate Telstra in the market and bolster our capabilities so that we can be the end-to-end technology partner our customers need now and in the future.
What to make of this for the Telstra share price
It represents a relatively small deal considering Telstra is worth tens of billions of dollars, but it speaks to the direction that Telstra wants to go to in terms of being offer more of the digital service that businesses and governments are expecting.
I’m not sure I’d say this makes Telstra a much better buying opportunity, but I do think the business is an attractive large company to own for the foreseeable future as it grows its profit and pays dividends.
