The industry is chewing over Wavenet and Daisy Corporate Services’ mega-merger, with one onlooker saying it “signifies that M&A is back on” in the MSP space.
The duo announced their decision to combine on Friday, with Daisy Corporate Services’ CEO Neil Thompson revealing in a LinkedIn post that a deal was inked at 3.30am that day following six months of talks.
The union creates a business with £500m revenues, around 2,000 staff and 22,000 customers. Daisy Chairman Matthew Riley will join the Board as a non-executive director.
“M&A back on”
The move, along with Focus Group’s recent ‘unicorn’ sale to Hg last month, demonstrates that investors are coming back to the MSP market after a 12-month hiatus, Dominic Black, Director of Research Services at Cavell Group, said.
“For me what it signifies is that M&A activity is back on,” he told IT Channel Oxygen.
“What we’re seeing is that these larger companies are able to get through to their next round of growth. We saw Focus getting in their funding from Hg, and now we’ve seen Wavenet and Daisy Corporate Services merging.
“If you look over the last couple of years there hasn’t been those deals being signed in the MSP space. But finally we’re seeing investors are back involved, trade deals ae back, so it’s good for the industry that people are looking at the sector with a positive eye on it.”
“A full-stack MSP – the fit could be really good”
Solihull-based Wavenet has been transformed by a series of blockbuster acquisitions under successive private equity backers Beech Tree and Macquarie. Its purchase of AIM-listed rival Adept last April catapulted its pro-forma revenues to £200m.
Daisy Corporate Services, the £208m-revenue enterprise IT arm of comms giant Daisy, was itself built on a series of acquisitions last decade, including Phoenix IT and Alternative Networks.
So how will the two businesses fit together?
“DCS is a very capable and competent MSP for the mid corporate market – so not the FTSE 100 but 500 to 5,000-employee businesses. They’ve got a very good proposition driven by business continuity and security, with the network sat behind it,” Nathan Marke, COO at distributor Giacom told IT Channel Oxygen.
“Wavenet for me is doing a very similar thing, but in a slightly smaller customer base. This feels like it’s a bringing together of a larger-end corporate MSP with a slightly lower-end MSP.
“So the fit could be really good – it’s delivering a full-stack MSP, and that’s really exciting.”
Marke also billed the move as a boon for the MSP sector.
“It’s following very closely after Hg invested in Focus Group. This deal is backed by Macquarie Capital. Having two very big, well-respected global investors showing such a keen interest in the SMB and corporate market in the UK is just tremendous for the sector,” he said.
“Worst-kept secret”
The deal comes almost six years after Daisy Group ditched its ‘One Daisy’ strategy and instead opted to split into four independent businesses (including Daisy Corporate Services).
Daisy sold its Digital Wholesale Solutions partner services arm to Inflexion in 2021, and more recently closed its Allvotec division.
Its ambitions to sell DCS was therefore a “worst-kept secret”, Nikki Freeman, Business Development Director at Knight Corporate Finance said.
“We were expecting a deal at some point, but we didn’t quite know it was going to be with Wavenet,” Freeman told IT Channel Oxygen.
“It’s an exciting deal for them. It will bring the biggest MSP together, and its smaller competitors may struggle against them.”
Talking to IT Channel Oxygen, Ralph Gilbert, Founder of Focus Group, stressed that Focus operates in “slightly differently” to both Wavenet and Daisy Corporate Services.
“Wavenet and the business they are buying are more enterprise than us, so we don’t really come across each other too much in M&A, or anything else,” he said.
“It’s got to be positive that deals are happening. I’m a big admirer of what Matt Riley has done over the years, so if he’s managed to do what he’s done, well done.”
Doug Woodburn is editor of IT Channel Oxygen
