12/8/2010 11:21:00 AM
XLN Telecom to make ‘select’ acquisitions
XLN Telecom is planning to make a number of ‘select’ acquisitions following ECI Partners move to buy out majority stakeholder Zeus Private Equity’s stake in the reseller in October this year.
Zeus backed a management buy-out of the company in 2008, investing £6.63m. The private equity company says it achieved a multiple of 4.5 times its original investment from the sale to ECI. The enterprise value of XLN is approximately £80m.
The deal with ECI gives XLN Telecom the war chest to more than double the size of the business through acquisitions.
Nellemann says that any acquisition will be targeted: ‘We will make a select number of acquisitions so long as they fit our market niche of small businesses. We are not prepared to move away from that niche and just buy anything. If they are very small businesses then we are happy to buy them, as well as businesses that bring us a product capability, because it is easier to buy them than build the proposition.’
Nellemann says expanding XLN Telecom’s product portfolio will also be key to growing the business.
‘We need to change the DNA of what we are. By moving from fixed-line into mobile and mobile broadband and by having our own VOIP platform and moving towards data and financial services, we will hopefully get out of the depressed multiple of telecoms.
A lot is in perception – if we are seen as a hosting company that will add a great deal of value.’
Nor does Nellemann rule out XLN Telecom becoming an acquisition target. ‘I suspect that will depend on the level of our success. The more successful we are the longer we will stay in to grow as much value as possible. I would say in two-and-a-half years we will start being tentatively approachable.’