MARKET UPDATES
M&A spurs confi dence
February proved to be another interesting month for telecoms M&A, with activity in the market picking up as predicted, reports Marcus Allchurch, Telecoms M&A Specialist at BDO Corporate Finance.
previously extended its acquisition facilities to £115 million. It is worth pointing out that this increase in debt was achieved by a combination of its existing lenders (HSBC, Lloyds and Yorkshire Bank) increasing their hold levels and the introduction of Barclays as a new provider of finance. This move is positive: It points to a softening in the lending markets and an appetite from banks that is catching up with the sharp appetites we have been seeing from trade and private equity buyers.
D
Positive outlook Without getting carried away and calling the start of a bull market, we can be confident that this will prove to be positive for all of us: More access to capital means more ability to close deals, so there will be more parties able to seriously consider growth through acquisition; and the increased availability of debt in private equity deals will increase the returns available to those private equity houses, which will consequently be able to pay higher prices to buy the companies they want.
We have heralded the return of private equity to mid-market telecoms for six months or so now, and are beginning to see this come through in completed deals. HIG Europe is a good example of a high calibre private equity house that has made
aisy has continued to grow aggressively through the acquisition of Bucks-based O-Bit Telecom having
Opportunity at small end
Tough economic times are influencing the way small businesses operate and invest in communications technologies, observes Stuart Walker, DrayTek’s IP PBX Business Development Manager.
B Marcus Allchurch
a major move into the sector, buying both AIRCOM International and Fibercore in the same week. BDO Corporate Finance advised HIG Europe and we were impressed by its understanding of the telecoms market and commitment to supporting the sector. HIG Capital, the parent organisation of HIG Europe, has an enviable track record in private equity investing. The firm has $6 billion of capital under management and specializes in providing capital to small and medium sized companies with strong growth potential.
As spring approaches, we are confident that there will be significantly more activity from private equity backed companies. Is it possible that one or more of these could provide a competitor to Daisy in the consolidation of SME telecoms? n
roadband router and firewall manufacturer, DrayTek, entered the sub- 50 extension market last summer when it launched the Vigor IP PBX system, which builds on the firm’s flagship premium ADSL router Vigor 2820 series. Having operated in the small systems market for eight months, Walker noted that tough times have now placed mobility solutions such as remote extensions, VPN and soft phones high on the agenda of small firms. “It is these solutions that are driving demand for efficiency, meeting the need to operate with a smaller, leaner and more flexible workforce,” said Walker.
These working strategies provide a hook to encourage small businesses to make an investment in new technology, especially since the efficiency gains and RoI are so easily demonstrated. A key demand in the small business market is now mobility because a smaller work force needs more flexible working practices. Mobility features such as VPN, remote extension, off net transfer and forward are becoming essential tools for businesses. “Disruptive events such as heavy snow falls and ash clouds adds further endorsement of the advantages of this technology,” added Walker.
End user resistance to VoIP and SIP is diminishing, he observes, however there is still a degree of suspicion among some customers, which means that a hybrid solution could
be the preferred route. “Building in resilience to a SIP solution such as dual WAN failover, legacy ISDN, analogue lines or even 3G failover allows the end user to make a gradual migration to the advantages of SIP, while remaining within their comfort zone,” Walker added.
Efficiency gains DrayTek’s IP PBX systems combine dual WAN router, firewall, 3G, PBX functionality, SIP and legacy connectivity of ISDN and analogue lines in a single license free unit. Walker commented: “Our resellers are now able to offer a combination of efficiency gains, cost savings and resilience in a scalable low TCO unit designed specifically with the small business in mind.”
The IP PBX creates many more sales opportunities for resellers at the lower end of the market where large volumes of business are possible. Interoperability with any open source SIP handsets further adds to the appeal and allows resellers to offer a range of IP endpoints to meet customer needs and differentiate their offering. “Additional lock-in opportunities with broadband services are helping generate regular revenue streams,” added Walker. “This is in addition to maintenance, and of course the initial one-off purchase allowing the reseller to provide a complete wrap around of services and build strong customer relationships and dependency.”
n Small PBX market review – page 38
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