The sales process for a couple of native data centre providers is gaining some momentum, with Six Degrees edging closer to a deal and Adapt appointing a corporate financier to market the business.
London-based Six Degrees called on DCC Advisory in February to sell the voice and data hosting firm by April, as we exclusively revealed, with private equity backer Penta Capital looking to cash in on its asset.
Penta forked out £60m four years ago to finance a buy and build strategy that was executed by the former management team at SpiriTel. Six Degrees was born out of the three platform investments including UK Solutions, NetworkFlow and Protel.
Sources tell us the negotiations have reached the second stage of a deal, which is likely to be struck next month or in early July. The remaining bidders are understood to be mainly venture capitalists.
El Chan believes Penta are looking for a sale price that is equivalent to roughly 12 times EBITDA, which was £15m in fiscal ’14.
Adapt and overcome
Eslewhere in the market, managed services, cloud and hosting outfit Adapt has appointed an M&A and corporate finance advisor ARMA Partners to punt the business from autumn or Q1 next year.
This would indicate a sale is not likely on this side of 2015, as expected, but ARMA may have its work cut out to find a buyer at the asking price, believed to be around £150m, a source claimed.
But in the last set of financials for fiscal ’14 ended June, EBITDA was £4.55m, down from £5.27m. This would mean any buyer would need to cough up a multiple of 32 times EBITDA. ®
Tom Wells, partner at ARMA is running the sales process. Previously he worked at Merril Lynch where he was a managing director and head of telecom investment banking for EMEA. He did not return a call for comment.
Private equity firm Lyceum Capital took a majority stake in Adapt for £30m in 2011, and is also eyeing up the exit.
The problem for businesses such as Six Degree and Adapt is that they are vulnerable to the strategies of the cloud giants including Microsoft, AWS and Google, that are currently slashing prices to beat each other.
It is likely these firms will need to offer more specialist services to survive the price war in the longer term, and to maintain their costly infrastructure and win new customers.
Six Degrees refused to comment and Adapt did not return our calls. ®