iomart continues acquisition spree with £23 million buyout of cloud backup firm

Cloud provider has continued its acquisition spree with a £23 million deal to buy cloud backup and disaster recovery firm Backup Technology (BTL).

Leeds based firm BTL has around 200 enterprise clients, protecting over 10 petabytes of data for firms including Siemens, British Red Cross, Suzuki and Pernod Ricard, as well as both Liverpool and Everton football clubs. The company, which provides services worldwide based on software from Asgira and NetApp storage, had a turnover of £5.2 million during 2012, and employs 16 staff.

The company will now become part of iomart Group in a deal worth a total value of £23 million, with an initial cash payment of £17.5 million, £3.5 million from the issue of 1.2 million shares, and a deferred payment of £2 million in January 2014.

“We are delighted to welcome BTL to the Group as they have achieved ground breaking progress in the delivery of cloud backup and disaster recovery and have been on our radar for some time,” Angus MacSween, CEO of iomart Group.

“BTL gives iomart a solid and well-established platform to grow further from, with a very good enterprise customer base and little crossover from the existing Group base.  It’s a very good strategic fit, complementing our portfolio of existing products.”

Ritchie Fiddes, co-founder of BTL who continues as Sales & Service Director, added that the deal will mean that BTL can now work with “even bigger customers”, by plugging in to iomart’s “enterprise level data centres and fibre network”.

Avoiding 2e2 acquisition 'pitfalls'

The acquisition is the second in recent months, also buying out managed service provider rival Redstation, in an £8 million deal. The company has also bought other firms this year including Melbourne Service Hosting, Internet Engineering and Skymarket, while past deals have included rival hosting company Titan.

As a result of the acquisition iomart Group now hosts a total of 20,000 servers across the UK, with 10 data centres servicing a variety of sectors across the UK.

According to TechMarketView analyst Kate Hanaghan, making multiple acquisitions in the cloud and managed services market has its ‘pitfalls’, as evidenced by the failure of 2e2. The service provider went bankrupt earlier this year after spending £200 million on a string of acquisitions over a number of years including Morse, Netstore and Compel.

However Hanaghan said that iomart has been careful to spend its cash on companies that can operate and generate revenue independently, with less work to do around technical integration.

"The failure of 2e2 has made the infrastructure services industry and market hypersensitive towards the possible pitfalls of multiple acquisitions,” Hanaghan said. "iomart’s approach is to avoid buying firms that will cause an integration ‘headache’.

"Indeed, being able to move at pace to acquire and integrate in fairly quick succession is critical in the cloud and hosting markets. This is because competition for the best firms is increasing (we know iomart wasn’t the only party interested in BTL).”

Cloud and hosting market growth

Hanaghan added that acquisitive spending is important for iomart to capitalise on the strong growth seen in the "bouyant" cloud and hosting market, as enterprise customers increasingly look to external providers for their IT needs.

“While iomart is growing organically, acquisitions are an important part of the growth strategy as they open up new customer bases and help to buoy future organic growth," she said.

“The mid-market for cloud and hosting services - a key market for iomart - continues to grow apace as organisations come to the realisation that their internal IT is no longer up to the job of supporting the needs of the business. Iomart, along with competitors such as Adapt, Pulsant, Six Degrees and Memset, is certainly nestled in a very buoyant market.”

Copyright © 2013 IDG Communications, Inc.

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