Protagonists in the £27 million sale of service provider SpiriTel to Daisy Group reckon chief executive Alastair Mills job on the business will be a model for market consolidation through 2011
Financial advisors to SpiriTel’s £27 million sale to Daisy Group this month said Alastair Mill’s turnaround of the service provider business and its subsequent backing and strategy will be a template for consolidation of the reseller market in 2011.
Knight Corporate Finance, which advised SpiriTel in its sale to Daisy Group this month, has advised on 21 deals in 21 months, mostly in the telecoms sector, including the sale of Edge Solutions and ADK Communications to SpiriTel in December 2009 for a combined fee of £4.6 millon. The sale of SpiriTel to Daisy is its largest deal to date.
Director Adam Zoldan said: “[Chief] Alastair (Mills) and his team have demonstrated how well a managed series of acquisitions can deliver a spectacular return for investors. The deal is also indicative of the continued buoyancy of the sector and we expect more buyers to seek acquisitions with funding from the private equity sector.”
He added: “This is a perfect example of how to deliver an acquisition strategy from start to exit. Daisy Group is acquiring a business that’s growing with a good sales engine that will continue to deliver organic growth. SpiriTel’s management under Alastair Mills has been transformational. When he started the company was pretty much about loss making and wholesale and no one was really sure what direction it was going in.
“He picked it up, established it as a B2B company rather than a wholesale company and turned it from one making losses, not really going anywhere, into one of the major success stories of 2010.”
Marc Young, director of corporate finance at FinnCap, which also advised SpiriTel, remarked: “SpiriTel has demonstrated how AiM quoted businesses are able to benefit from a public market presence to fund growth and drive attractive exit multiples.”
Mills (pictured) explained to Mobile News: “In the early years, the company’s prospects were very questionable. It was pretty insolvent. At first it was just a turnaround job. The market was very fragmented at the time.
“I saw customers would want to buy more services from a single supplier. We had to buy companies to build a platform to do that, which is what we did. By putting those companies together I figured the crossselling opportunity was significant.”
Since 2007, and the establishment of its SpiriTel Business unit, SpiriTel has acquired 12 companies, each specialising in a specific area of communications: either mobile, fixed line or data services provision. The company has, with these assets, cross-sold into an expanding customer base.
Mills said: “But the buy-and-build strategy is only half the story. If you can’t deliver organic growth alongside it, your future is questionable. ”
SpiriTel’s results for the year to April 30, 2010, showed 15 per cent organic growth in revenues from its Business Division, with cross-sales contracts of over £4 million during the year.
In addition, it reported a 71 per cent annual increase in revenues in the Business Division to £17.7 million with underlying EBITDA also up 70 per cent to £3.1 million from £1.8 million. Five per cent fixed line churn and eight per cent mobile churn were also detailed.
Mills said: “Our organic growth rate is one of the best in UK telecoms. We’ve had a very successful period through cross selling between mobile, fixed line and data services.
“It was always my intention when we set up this division we would buy different businesses that were specialist in particular areas, such as mobile, VoIP systems and fixed line, and cross sell between those bases. That’s something we’ve done very successfully.”
Mills defended the price paid for it by Daisy Group. “We have a corporate customers list that is the envy of our peers. Daisy is getting its hands on a very significant mobile base, of around 40,000. We have single digit churn.
“We are leaders in converged communications, and our organic growth is a prize asset too. Daisy wanted to get its hands on SpiriTel, and paid the price to get it.”