Terra Schwartz in talks with potential acquisition target; exploring options with VC/PE investors

05 September 2019

Terra Schwartz, a privately held Australia-based boutique consultancy firm, is in talks with a cyber security player as it seeks acquisitions to broaden its offerings, said Director and co-owner Jan Marais-van Vuuren.
The Canberra-based company, which provides professional services to government agencies, is also holding conversations with potential investors about options to work together after being approached by an undisclosed local venture capital (VC) firm and a private equity (PE) firm separately, the director told this news service.
Terra Schwartz would only consider taking an external investor on board that could support its growth strategy, including its five-year plan to become a leading partner in the public sector, Marais-van Vuuren said. The company is also looking to grow its cyber defense advisory capability, he added.
The company, which is seeking acquisitions in adjacent service offerings to provide a full solution stack, is particularly interested in technology for encryption and secure data sharing, he said. It expects to close a deal in the next 12 months, he noted.
Marais-van Vuuren is scouting for M&A opportunities himself, and he is also working with some mentors on the company’s strategy. The company is talking with some external advisors for required validation services and should “lock down” an advisor in the next three months, he said.
With a projected turnover of more than AUD 20m (USD 13.6m) for FY20, Terra Schwarz does not have a set size criterion for potential targets, but more importantly, is looking for unique capabilities rather than generic services, the director said.
For example, the cyber security business it is in talks with now has patents around technologies to apply artificial intelligence in protecting and distributing appropriate data to selected users, the director said, without disclosing the target. Terra Schwartz could help the target to take that technology to the market, while benefiting itself by adding an additional service offering, he added.
The company expects to self-fund deals, but it might also consider other options for larger deals, he said.
 Founded in 2016, the company is owned by Marais-van Vuuren and Louis Matti (Director) on a 50:50 structure.
Offshore expansion
Terra Schwartz, being an approved supplier to United Nations, NATO, UK Ministry of Defense as well as the Federal Government of the United States, is also looking to provide more services offshore, the director said.
The company is particularly interested in providing its services in the US, UK and European countries (NATO members), he said, noting that the company recently participated in a multinational cyber defense initiative in Europe.
Initially, Terra Schwartz will use an Australia-based team to serve offshore clients and will set up offices or teams in those targeted markets when it is necessary, the director said.
IPO in five years’ time 
The company will seek a listing on the Australian Securities Exchange (ASX) in some five years, allowing the company to continue its strategy, Marais-van Vuuren said. A trade sale, in contrast, often ends up in abandoning the target’s original strategy, as the buyer is doing the acquisition to support its own strategy, he continued.
Terra Schwartz competes with PwC and KPMG, the director said. Different to its competitors, Terra Schwartz specializes in providing above-the-line services only, while its peers also offer below-the-line services that might cause a conflict, he said.
An above-the-line services provider is appointed by government agencies to represent and act, negotiate and manage on behalf of the client, while below-the-line services providers are companies that are appointed to supply or build certain systems, he explained.
The company has 40 employees and expects to hire seven more staff in the next few weeks, he said.
Terra Schwartz’s services include program and project management, commercial contract and vendor performance management, as well as supply of specialized personnel, according to its website.
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