Redcentric is to acquire the entire issued share capital of InTechnology Managed Services Limited (IMS), a wholly owned subsidiary of InTechnology, for £65m in cash. The deal, which is technically a reverse takeover, will create a business with pro-forma revenues of c£90m - of which over 80% will be recurring. Adjusted EBITDA will be in excess of £20m. In the year to March 2013, IMS generated revenues of £40.9m and EBITDA of £8.0m.
In February of this year, Redcentric was spun out of Redstone as a standalone network managed services business (see Redstone reconfigures ‘sum of the parts’). Redstone’s acquisition of Maxima (September 2012) is the other key milestone in Redcentric’s history (see Smith brings Maxima to the Redstone party). With acquisitions playing such a pivotal role for Redcentric, should we be concerned that it is another 2e2 in the making? The answer is that in terms of offerings (Redcentric is focused on network services, application, systems and security management, while InTechnology has data centre and network capabilities, and VOIP capacity) and target market (both are mid-market players), this is a very sensible move. The mid-market is incredibly fragmented and feeds many, many different types of suppliers. Redcentric is gaining some serious scale as a network managed services provider and now looks quite a bit bigger than several of the high profile players we cover in our recent report, Mid-market Data Centre Services: Opportunities and Competitors. Redcentric is certainly not following 2e2’s fatal strategy of acquiring many different types of businesses that cannot easily be (and indeed were not properly) integrated.
We’ll have more later in a HotViewsExtra note for subscribers only.