Australian IT services group DWS has entered into a binding agreement to acquire advisory, solutions, managed services and recruitment company SMS Management and Technology in a deal designed to create ‘a leading Australian IT services provider with the size and capability to fully service the market'.

The AU$124 million deal is designed to strengthen and deepen DWS' core service offering across IT consulting, while also broadening the scope of offerings to include managed services and labour hire services, and will also give DWS a foothold in South East Asia.

SMS has nearly 1400 staff across Asia Pacific and provides a range of IT services including established IT consulting and development and implementation businesses. It also offers managed services and labour hire services.

The deal will see DWS's billable workforce swell from 645 across Australia, to nearly 2000 across Australia and South East Asia, where SMS has 40 staff in Hong Kong and Singapore and 20 in Manila.

Danny Wallis, DWS chief executive, dubbed the acquisition ‘transformation' for both businesses and the Australian IT services market as a whole.

“We are intent on expanding the breadth and depth of our services so we can provide solutions designed to meet our clients' needs,” Wallis says.

“The acquisition supports this commitment and we anticipate it will generate real value for our employees, clients and shareholders.

DWS says the deal is will create ‘a leading Australian IT services provider with the size and capability to fully service the market', DWS says.

“As such, the combination will provide consolidation in the Australian IT services market, a goal that has been sought by industry participants over many years,” the company says.

It says the combined customer base provides diversification across key industry verticals including financial services, government, TMT, energy, resources and infrastructure and other commercial markets.

Wallis says the combination of the two companies provides IT consultants with ‘the opportunity to be part of an Australian-based champion as well as increasing the range of government and blue chip clients that they can work with and support'.

The company expects cost synergies of ‘at least' $5 million per annum, with additional benefits from efficiency improvements and cross selling opportunities.

The deal is subject to conditions including SMS shareholder and court approval with a first court hearing expected in late April. SMS is expected to meet with shareholders in June.