Service provider SpiriTel has snapped up B2B resellers Edge Solutions and ADK Communications for a combined fee that could rise to £10.8 million. The pair represents its seventh and eighth purchases in three years.
Edge Solutions offers mobile, fixed line, VoIP and managed IT services. ADK Communications offers alternative billing platforms, business phone systems, VoIP and mobile services.
The deal for Edge Solutions is for an initial fee of £3.6 million cash.
Performance related earn-out payments of up to £5.7 million may also be payable in cash by January 2011, although SpiriTel said the January pay-out will likely be closer £1.2 million based upon current performance.
SpiriTel has also agreed to pay £1 million for ADK in cash on completion of the deal, with a possible performance related earn-out payment of up to £500,000, which will be payable in cash in January 2011. Again, SpiriTel said the likely earn-out will be closer £200,000.
SpiriTel has raised an extra £10 million in loan notes. The fundraising was led by SpiriTel’s largest shareholder Penta Capital, includes participation by Synergy Capital and Toscafund. The loan is due in 2014.
The new funds offer SpiriTel the chance to further drive consolidation of the fragmented telecoms reseller space.
The acquisition of Edge gives SpiriTel an extra 200 corporate customers, with an average spend of £2,000 per month each and an annual churn rate of less than two per cent. It said the customer base represents good cross-selling opportunities.
Edge will be integrated into SpiriTel’s existing operation promptly. Edge managing director Steve Burgess joins SpiriTel to head its networks business.
SpiriTel chief executive Alastair Mills said: “The acquisition of Edge represents a significant step in our strategy to acquire, integrate and grow. We have a track record in successful acquisition and integration and the delivery of organic growth from cross selling our converged product portfolio.”
ADK, meanwhile, serves around 300 SME customers, and another immediate cross-selling opportunity.
Mills said: “The acquisition of ADK is another exciting step in our acquisition-led growth strategy. The customer base is a strong fit for SpiriTel and further leverages the operational scale of our business division. SpiriTel has an excellent track record in effective acquisition integration and we are confident it will prove a highly profitable addition to our business division.”
The two acquisitions combined will see SpiriTel’s base rise to around 2,800 businesses.