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By | Paul Kunert 10th October 2011 10:52

RMS swallowed by Pinnacle Telecom

Reseller and services biz flogged after profits turned to losses

Bosses at Redstone Managed Security (RMS) have sold up to cloud provider Pinnacle Telecom for £468,000, less than half the value of the deal they struck in an MBO last December.

At the tail end of 2010, RMS management sealed a £1m bid for the security reselling and services outfit with previous owner Redstone – including £500,000 in cash. The rest was in loan notes.

The latest transaction includes £25,000 in cash, £100,000 of ordinary shares of AIM-listed Pinnacle and deferred payments of £343,000 will be stumped up in readies between this month and Christmas 2014.

Results in the nine months after the incorporation of RMS – from November to last August – showed a turnover of £2.8m but an operating loss of £511,000. RMS had been profitable prior to the MBO.

Alan J Bonner, chief exec at Pinnacle Telecom Group plc, said connectivity and security are the two major concerns for customers considering the shift from an on-premise IT model to the cloud.

"IT security is of the utmost importance ... as the take-up of the cloud continues to move from early adopters to mainstream," he said.

Pinnacle claims that it delivered connectivity to a number of high profile events including the UK General Election, the Pope's UK jaunt and the Royal Wedding of Wills and Kate.

Under the terms of the deal, around 30 RMS staff will transfer to Pinnacle – 58 moved across from Redstone to RMS as part of the MBO.

Bonner said that after a 90-day integration process – which will likely include one-off restructuring costs – he expected RMS to boost its bottom line.

He said Pinnacle plans to seek out further opportunistic "bolt on, well-priced acquisitions". ®

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