Arq Group courts buyers for ‘deteriorating’ enterprise division

Beleaguered IT services company Arq Group is priming itself for the sale of either its enterprise or SMB divisions following a challenging year.

The publicly listed company informed shareholders that it had received several purchase offers for the two businesses and is now “testing the market” for a sale.

Arq Group has appointed due diligence advisors and prepared a data room for potential buyers while continuing to perform a “cost review program” after a year of tumbling profits and revenue.

“Both the SMB and [enterprise] businesses are strategic businesses in growth markets,” Arq Group Chair Andrew Reitzer said. “With clear plans in place for improved performance, it is our intention to test the market for the sale of these businesses only where a divestment achieves appropriate value for shareholders.”

In its Australian Securities Exchange (ASX) update posted on 16 October, Arq Group flagged its stronger-performing SMB business over the enterprise division, the latter of which is expected to post a shortfall this year due to a “marked deterioration” in trading conditions.

Last month, the formerly named Melbourne IT announced its CEO of six years Martin Mercer was to step down, a move that coincided with a grim forecast for the enterprise segment as customers either paused ongoing work or delayed upcoming projects.

Claiming the company had an overhead structure “more appropriate for a larger business”, Arq Group plans to axe more than $2 million in costs by the end of the financial year. 

Half of this amount has already been saved with measures that included the departures of enterprise managing director Peter Wright and SMB managing director Emma Hunt in July. 

However, in its latest update. Arq noted its SMB division was performing "in line with expectations" and is projected to meet revenue forecasts of up to $10.7 million this year.