Deals
Alternative Networks Plc Acquires Control Circle Ltd
Alternative Networks, the business communications service provider, today announces the acquisition of Control Circle Limited ("Control Circle"), a well-established UK based provider of complex managed hosting and cloud-based services to enterprises and on-line businesses, for £39.4m in cash (the "Acquisition").
Highlights:
- Alternative is acquiring the entire issued share capital of Control Circle for £39.4m in cash on completion from the founders, and Scottish Equity Partners.
- The acquisition is expected to be earnings enhancing from completion.
- Joint bank facilities of £43m have been provided by Barclays and Lloyds, replacing existing facilities of £6m
- Control Circle reported £21.1m of revenue in year ended 30 September 2013 and EBITDA of £1.9m.
- The strategic rationale for the deal is as follows :
- Well matched customer bases allowing for significant cross selling opportunities
- Asset light, high level of technical expertise
- Strong management team to continue with business
- Progressive dividend policy of the group is expected to remain unchanged
The acquisition of Control Circle is a core strategic investment. Control Circle offers the delivery of complex managed hosting, cloud and datacentre services, which is an increasing requisite for the Company's existing and targeted UK enterprise clients. Control Circle's skills set will complement and bolster Alternative's existing services in networking and datacentre together the recently acquired virtualisation skills of Intercept IT, such that the enlarged group will now have a comprehensive and compelling data and IT services portfolio including managed and cloud based services, such as managed hosting, datacentre virtualisation and application management. Furthermore, the enlarged group offering will allow clients to choose private or public hosted cloud services.
Alternative and Control Circle have both adopted asset light and customer rich strategies, dedicated to offering flexible data and communications services.
Financial Information
In the audited results for the year ended 30 September 2013, Control Circle reported revenue of £21.1m (78% recurring revenue), a pre-tax profit of £0.9m and an EBITDA of £1.9m. Notwithstanding an investment in senior management capability in 2012, Control Circle has focussed on improving profitability in 2013, and in the six months ended 31 December 2013 the company delivered underlying EBITDA of £1.1m.
In 2013, total revenue grew 1% on the previous financial year, as growth was constrained by an exceptional reduction in revenues from one customer that underwent a significant financial restructuring. In the previous three years, the compound annual growth rate of revenue was 32%. Annualised contracted recurring revenue at September 2013 was up 10% on the previous year.
Capital expenditure in the year ended 30 September 2013 was £1.1m and net assets and gross assets at that date were £3.9m and £10.5m respectively.
Management
The existing, strong management team of Control Circle will continue to run the day to day operations of the business. The CFO, being one of the founders, will leave the business after a short transition period, with the other founder and CEO remaining to focus on the exciting cross selling opportunities between the top customers of Alternative and Control Circle and winning new business.
Edward Spurrier, Chief Executive of Alternative Networks, commented:
"We are delighted to have acquired such a complementary business in the managed hosting arena. Control Circle is an excellent fit not least because, like Alternative, it is asset light, skills rich, and has a focus on premium service and technical excellence to the Enterprise market. Like Alternative, it has developed a dynamic online service portal. Control Circle's customers are highly complementary with Alternative's and have a higher penetration in similar industry verticals, principally in the private sector. Given the aligned strategic emphasis and strong growth profiles, the combination of Control Circle and Alternative at this time has highly compelling logic.
We intend to invest in the growth of Control Circle and are confident that combining their services with those of Alternative will provide the Group with new and enhanced offerings to its customers.
We have spent the past three years evaluating numerous hosting opportunities, very few of which fulfilled our stringent acquisition criteria. Control Circle and Intercept are the only companies that have done so, and we are delighted to include them in the Alternative Networks Group."
Comments