Exo-net finds its Solution

By ADAM GIFFORD

A year and a day after launching its exo-net 3000 accounting and e-business software for small- and medium-sized companies, Auckland company exo-net international has sold to fast-growing Australian company Solution 6 Holdings for A$30 million (NZ$38 million).

The deal has put a smile on the face of "venture catalyst" IT Capital, which has put $1.8 million into exo-net over the past year in exchange for a 35 per cent stake.

"That takes care of our profit this year," said chairman Keith Phillips.

The deal involved $13 million cash and $25 million in Solution 6 shares. IT Capital can bank $9.6 million and has $3.1 million in scrip.

"We believe the stock has upside, so we are willing to accept that," Mr Phillips said.

The remaining shares were owned by exo-net founders David McKee Wright, Maurice Bryham and Mark Loveys, and their Australian and Singapore partners.

Mr McKee Wright said he had spent much of the past year travelling the world looking for partners who could help exo-net achieve its goal of being a global software brand.

Though there was no shortage of people willing to throw money at the company, he was looking for partners who could provide strategic, technical and distribution expertise.

"Nine weeks ago I ran into Solution 6. There was chemistry there. Like us, they are growing very quickly.

"They can provide us with the benefits we seek as both financial and operational partners. The next stage is to take New Zealand technology to the rest of the world."

Solution 6's core product is practice management software for accounting firms.

In the past couple of years it has mounted an aggressive growth and acquisition strategy, including buying its New Zealand distributor. New Zealanders are well represented at senior management level.

Mr McKee Wright said about a third of exo-net's sales were through accounting firms, who recommended it to customers. It has about 100 accounting firms on its books as channel partners, with a medium-sized firm likely to make a sale a week.

"Solution 6 has 10,000 partners. You can do the math on that."

Solution 6 strategic marketing general manager Tim Molloy said exo-net's enterprise resource planning, e-commerce transaction engine and web shop software made a perfect fit with his company's e-business strategy.

exo-net software runs on a server within a company, or can be accessed over the internet in an application service provider environment, and is the area Solution 6 is betting on being the future of business computing.

Mr Molloy said Solution 6 had made 14 acquisitions over the past years as it attempted to become a leading global e-business software provider.

"We have scoured the world looking for this particular part of the puzzle," Mr Molloy said.

"This is world class. It's about small and medium enterprises being able to publish their business on the web so they can transact in an e-business world."

The exo-net engine will fit with other Solution 6 products, giving smaller businesses access to a greater depth of business expertise than they may be used to.

Mr Molloy said exo-net's e-commerce infrastructure tools "forms the core of what Solution 6 sees as the future role of the accountant, as a virtual chief financial officer to SMEs."

Mr Molloy said exo-net would be a separate business unit within Solution 6.

Since its launch, exo-net had gained 2500 end users.

"Most importantly, their financial plan is on track to be cash flow positive, delivering a significant operating profit this financial year," Mr Molloy said.