Insitec’s refinancing and acquisition of The Network
VCF Capital acted as financial advisor to Insitec on its refinancing and acquisition of a 65% interest in The Network.
$26.5 million | June 2022
Company Overview
Insitec Group (Insitec) is a leading ICT business servicing the Australian Defence Force, with a strategy and vision to become an Australian Industry Capability of scale, providing a range of services and R&D-led products to Defence and adjacent industries.
Founded in 2001, Insitec has a team of 150+ technical staff across three main operating divisions being:
Insitec ICT- an ICT systems engineering and networking business;
Insitec MIS – provider of Military, Intelligence and Space Systems R&D-led communications and networking products; and
Insitec People – a specialist technology recruitment division.
Background
VCF Capital was initially engaged as financial advisor to Insitec in 2019 to assist in establishing a debt facility with CBA to help facilitate the acquisition of a $43.5 million contract for ICT services to the Department of Defence’s Chief Information Officer Group (CIOG) Service Management Branch (SMB), along with an ICTPA panel membership.
The refinancing of Insitec’s debt facilities to Muzinich & Co. (Muzinich), which was also Muzinich’s inaugural loan in Australia, represented a significant milestone for Insitec as it continues to mature and corporatise its business in preparation for a potential future capital raising transaction with private equity and/or a trade sale.
Transaction Summary
In June 2022, Muzinich provided $26.5 million in senior debt to refinance Insitec’s existing facilities with the Commonwealth Bank of Australia (CBA), finance the acquisition of The Network, and provide additional growth/working capital to enable Insitec to continue to meet the growing needs of Defence.
With over 1,000 people anticipated to be required to support the ICT needs of the Australian Defence Force between 2023 and 2028, the acquisition of The Network will strengthen the Insitec People platform. This will enable Insitec to introduce new talent to help deliver an Australian sovereign defence capability, providing local ICT professionals with the opportunity to build skills and experience on leading-edge defence projects and discouraging the talent drain overseas.
Outcome
VCF managed a process that saw significant interest and received a range of domestic and offshore credit funds through VCF’s network, which led to the inception of Muzinich’s facility. The facility not only provided Insitec with the capital to complete the acquisition of The Network. Refinance existing debt and provide additional working capital, but also included an accordion feature to help finance further identified acquisitions.
The complex transaction process required Muzinich to conduct due diligence on both Insitec and The Network, the raising of an additional $3 million in convertible notes from investors to manage Muzinich’s credit risk from the transaction, and a restructure of Insitec’s existing group structure.