UK unified communications start-up Six Degrees Group is on the verge of completing its fifth telco acquisition in three months, according to CEO Alistair Mills.
Mills, who was head of UK B2B telco Spiritel until it was sold to local rival Daisy for…
UK unified communications start-up Six Degrees Group is on the verge of completing its fifth telco acquisition in three months, according to CEO Alistair Mills.
Mills, who was head of UK B2B telco Spiritel until it was sold to local rival Daisy for £27m last November, said he expects to acquire another voice services business through his new venture on 14 October.
He declined to disclose details of the acquisition, but said this firm targets the financial services sector and customers spending an average £3,500 a month.
Traditional UK resellers focus on the sub-£500 end of the market, according to Mills, who believes the country’s mid-market businesses, which are typically targeted by large carriers such as fixed-line incumbent BT, are currently underserved by unified communications firms.
“What we’re trying to say is that we’ve got the financial security and the network capability of the network operators, but will give you a better level of service,” he said in an interview with TelecomFinance.
Six Degrees Group has already acquired four local unified communications companies – UKSolutions, NetworkFlow, Protel and Key Account Management – after raising £60m earlier this year through venture capital firm Penta Capital.
Mills said that, in addition to this equity funding, he expects to secure a £20m loan from Clydesdale bank in November, without giving further details.
Following the company’s fifth acquisition later this week, Six Degrees Group will have drawn down approximately £40m from its current resources. This means that, together with its loan financing, the company will have £40m left to spend on further acquisitions to expand its business.
“Those five acquisitions take us to a run rate revenue in excess of £25m,” said Mills.
“We’ve got about 80 staff, and our net profit margins are over 25%, and the businesses that we have acquired have grown a combined 27% over the last year. So I think we’re in quite a good space.”
According to Mills, Six Degrees Group is likely to secure two more acquisitions before Christmas.
“One of which being a mobile reseller and the other one focusing on data,” he said.
However, Six Degrees Group is aware of the risks of a ‘buy and build’ strategy.
“This is not just a big scale play, we’re trying to cerate a business that is growing organically at the same time,” he said, pointing to how so far more than 90% of his group’s revenues are in contract and the group continues to return a high percentage of its EBITDA into cash.
According to Mills, at any one time his group is looking at around a dozen potential acquisitions, but so far most of these have not come through traditional channels.
“Out of the five deals we’ve done, only one of them was in a sales process,” he explained.
“The rest of them were identified by myself or our management team as acquisition opportunities. And that makes a big difference. We’re generally not buying companies that are doing a competitive auction or going through that sort of process.”
Six Degrees Group is financially advised by HMT, while SSD is its legal adviser.
Penta owns a vast majority of the group’s equity, with management owning a small double digit stake.
