Penta Capital Backs £60m Telecoms Managed Data Buy-and-build

Penta Capital today announces an initial £60m funding package to a new company established to acquire strong service providers in the UK managed data sector. The announcement follows the acquisitions of three established high-performing businesses in the sector, which form the initial platform upon which the investment will be significantly grown over the next two years.

The investment, sees Penta and its investment partners, including Toscafund, support the same team who successfully executed the buy-and-build behind SpiriTel plc, led by Alastair Mills, which was sold last year to Daisy Group plc for c.£37m. The investment represents one of the largest single investments in the managed data services sector in recent times with the strategic objective of building a market-leading core-to-edge service provider. Unencumbered by legacy constraints, the new group is capable of delivering the managed hosting and cloud connectivity solutions required by sme and corporate users in this era of instantaneous communications.

The initial three acquisitions are of leading datacentre operator UKSolutions, MPLS provider NetworkFlow and voice services company Protel, giving the new Group initial operations with [70] staff across four offices and [X,000] customers. The three acquisitions provide a formidable growth platform for the new Group which will expand through a clear strategy of providing three key managed data services elements: core, connectivity and overlay services.

UKSolutions provides core enablement: through its 15,000 square feet of datacentres, it delivers solutions that include the provision of dedicated managed hosting environments, hybrid cloud infrastructures and full private cloud architectures from their two datacentres. NetworkFlow provides access and WAN connectivity: through its own next generation network it provides high-bandwidth connectivity solutions for enterprises. It designs bespoke networks via 20+ interconnect agreements with major UK providers. Protel provides overlay converged services that leverage the underlying core infrastructure and access technologies. Its services include SIP trunking, inbound and outbound voice delivery, fixed mobile convergence and business continuity solutions, all managed via its bespoke customer portal. In order to complete its converged communications portfolio, the Group expects to acquire mobile voice and data capability in the near future.

The UK managed hosting market grew at a historical 4 year CAGR of 18% to 2010 (Gartner) and European market growth is expected to accelerate to 23% CAGR to 2013 (The 451 Group). By the end of 2011, cloud computing services are expected to generate 15% of worldwide technology spend with anticipated annual growth of 26% to 2015. This CAGR represents five times the growth rate of the tech industry as a whole (IDC).

Steven Scott of Penta Capital commented:
“We are delighted to be back in business with the former team at SpiriTel. We enjoyed working together and proved the buy-and-build potential in the fragmented telecoms sector. This time, our focus is far more data-centric than SpiriTel and we plan to build a substantial group through strong organic growth and by acquiring a complete service delivery capability. We’ve selected best of breed operators to establish our platform and come at this investment without any legacy issues. We look forward to building a substantial and attractive data-centric business over the coming years.”

At the time of announcement, Alastair Mills made the following statement:
“SpiriTel was one of the fastest growing voice companies in the UK before its acquisition last year. This was testament to a hugely talented and driven management team that delivered 20%+ organic growth, through a recession, in a declining market. I am delighted to be working with the team again following our recent successful fundraise. The trends identified by both analysts and end-user clients are the same: managed data services will continue to grow rapidly, driven by the desire for cloud connectivity and virtualisation. At SpiriTel we faced a challenge familiar in the market: we were a voice company trying to turn into a data company. This time, our Group is very firmly focussed on growing from a strong data services core: we’re starting with 15,000 square feet of datacentre space, a next generation network and a full suite of IP voice services. We are firmly positioned to capitalise on an exciting growth market.”