Daisy Group’s £27m purchase of SpiriTel

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Daisy Group’s biggest purchase to date sees absorption of major accounts and 40,000 O2 lines

Acquisitive reseller Daisy Group this month completed its biggest acquisition to date with the purchase of service provider SpiriTel for £27.3 million. The deal also sees it pay £6.1 million for debt facilities from Clydesdale Bank, which has funded SpiriTel’s buy and build strategy since the establishment of its ‘Business’ division in 2007.

Daisy Group, headed by chief executive Matthew Riley (pictured left), takes a business with a turnover of around £30 million and 200 staff at offices in London, Cardiff, Wigan and Glasgow. SpiriTel chief executive Alastair Mills (pictured right) and chief financial Ronnie Smith will leave the business next week, following a brief handover period. The pair will focus on other business ventures, they said.

SpiriTel is organised into SpiriTel Business, which sells voice and data services to businesses, and SpiriTel Technologies, focused on infrastructure and wholesale voice services.

SpiriTel Business, the company’s main trading unit, was set up in 2007, a year after Mills was appointed chief executive. Since, it has bought 12 other reseller companies and recently reported organic growth of 15 per cent. SpiriTel said cross selling between its mobile, fixed and IP units has enabled the increase.

Customer contracts
SpiriTel has a customer base of 4,200 SMEs, national and international companies including RBS, Barclays, BBC Worldwide, Marriott, HMV and City of London. It won its largest contract to date in August with a three year deal with Punch Taverns to provide a converged voice and data service to 800 sites. The deal is considered to be worth £5 million over the period.

The company is an O2 Centre of Excellence partner, and manages 40,000 mobile business connections, and also a Mitel Premier Partner. Daisy Group assumes Centre of Excellence status following the deal, and puts O2 on a level pegging with Vodafone is Daisy Group’s portfolio and base.

Riley said: “This is the largest acquisition the Company has made. It gives Daisy a strong foothold in the mid-market, strengthening our sales team and engineering force, while significantly enhancing our product portfolio and customer base.”

SpiriTel non-executive chairman Lord St. John of Blesto said: “The offer recognises the value created by our strategy of acquiring and integrating 12 businesses since 2006. Daisy will benefit from the customer base and cross selling culture the management team has built.”

Mills said: “The management has executed a comprehensive turnaround strategy to the point where we have now sold a business of genuine scale that competes for and wins major contracts with major businesses.”

Investors’ returns
The deal provides a substantial profit for private equity group Penta Capital, which originally invested in the service provider in 2003 and led a £10 million fundraising in November 2009.

Penta Capital partner Steven Scott said: “This was a difficult investment in the early years, which the current management team completely transformed, with our support, into a dynamic buy-and-build group in a rapidly consolidating sector. Twelve acquisitions were integrated quickly and effectively on a relatively ungeared basis and, despite the economic uncertainty, the team delivered organic growth alongside the acquisitions.”

In June 2010 Daisy Group posted financial results for the 15 months to March 31, 2010, which reported revenues at £134.4 million and adjusted profits (EBITDA) and operating losses at £11 million and £17.5 million, respectively. Despite this, it secured a £75 million bank loan facility for further acquisitions.

The firm bought seven reseller companies in the period, and a further three in the time until results were published, to bring its total spend to £190.1 million.

Daisy Group said integration of new assets was going to plan, with businesses purchased to March 31 running off common platforms. It said it will realise synergies of £17 million in the year to March 31, 2011. It has shut operations in Halifax and London to focus on centres at Nelson in Lancashire and at Heathrow and Harlow.

Its Nelson headquarters were expanded to accommodate 300 staff.

SpiriTel acquisitions

CallPlan £505,000 (September 2006)
Networks Direct (UK) £1.6 million (October 2006)
Ashland Group £3.7 million (March 2007)
tdotcom £260,000 (October 2007)
WN1 £2.02 million (April 2008)
ED Communications £3 million (August 2008)
Edge Solutions £3.6 million (December 2009)
ADK Communications £1 million (December 2009)
MoboTel Management £2.15 million (February 2010)
Boucon Network Solutions £650,000 (February 2010)
Nessco £1.2 million (March 2010)
Housing Communications £2.1 million (May 2010)

Daisy acquisitions

Eurotel £13.5 million (August 2009)
AT Communications £7 million (August 2009)
Redstone Telecom (Anglia Telecom Centres) £17 million (August 2009)
BNS Telecom £10.45 million (February 2010)
Managed Communications 6.3 million (February 2010)
Fone Logistics £3.6 million (June 2010)
MurphX Innovative Solutions £4.8 million (June 2010
SpiriTel £27.3 million (November 2010)

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