There seems to be no end to the M&A fever in the Telecoms reseller marketplace in the UK and it seems to have reached epidemic proportions with new “deals” being announced almost daily.
But what is driving all of this activity?
The simple answer is that the major Banks have woken up to a sector which historically has generated very strong cash flows and have started to lend again.
As reported in Comms Dealer recently, Chess Telecom has strengthened its role in the acquisition marketplace with a further £10 million facility with Barclays Corporate Banking bringing its total acquisition fund up to £25m in total. This includes an increase in their Revolving Credit Facility to £10 million as part of the government supported Funding for Lending scheme.
Chess has made over 70 acquisitions to date and it’s not the only one with M&A fever.
Daisy Group also recently announced new banking arrangements, swelling their war chest to £200m, and have vowed to go on another acquisition spree.
Daisy Group’s last acquisition was in February, when it took over IT data specialist The Net Crowd for an undisclosed sum. Previous purchases include Spiritel and O-bit Telecom. But as Matthew Riley, Daisy Group CEO commented, ‘We have only made 17 acquisitions in about three years, so there haven’t been many acquisitions for a while now,’ he also added that over the last year, the firm has been using the businesses it already bought to cross-sell. ‘We’ve been aligning ourselves,’ he said.
Not far behind Daisy and Chess are Six Degrees founded by Alistair Mills who sold Spiritel to Daisy for £37m in 2010.
Six Degrees was established in June 2011 and in just 17 months, Six Degrees has made 12 acquisitions, signed up 3,000 customers, achieved revenues of £54 million and almost £13 million profit. This was all achieved with the backing of Penta Capital, who partnered Mills previously at Spiritel.
But it’s not just the big boys who have M&A fever, a quick scan over the pages of any of the trade journals will throw up a handful of announcements outlining M&A activity between the resellers themselves, all this would indicate that the big companies are not the only ones who are attracting bank funding. Take the recent acquisition by Globalwave by TFM Networks almost doubling the size of the TFM Networks business overnight and achieved by attracting a significant loan from one of the high street banks.
The long and the short of all of this M&A Fever is this, the UK telecoms market is extremely fragmented and is in drastic need of consolidation and the banks and other investors have woken up to the fact that this is a sector they can make money in, almost a perfect storm.
This offers fantastic opportunities for smaller operators with ambitious management teams, like the one at TFM Networks, to consolidate their position through acquisition, take another roll of the dice and wait for one of the bigger fish to come along.
On the other hand it also offers those less ambitious with a fantastic opportunity cash in their chips and exit their businesses at a fair market value, which with all of the money being thrown at this market at the moment may be quite high.
4 Oceans offers professional advice and support to companies that are interested in either acquiring another business or being acquired, you can contact us here or if you want to find out more about our M&A Advisory services click here.
Leave a Reply