Hungry Six Degrees hunts next meal

Managed data services player claims it is not a conventional buy and build

Buy-and-build managed data services outfit Six Degrees has confirmed it is on the hunt for more bolt-on acquisitions.

After it was founded in July 2011 by former Spiritel boss Alastair Mills, Six Degrees hoovered up 12 firms in the space of 14 months and now boasts a turnover run rate of £60m.

Although the private equity-backed company, which provides data, hosting and voice services, has not made a conquest since September, marketing director Campbell Williams said the M&A spree is not yet over.

"Right now our focus is making a multimillion-pound upgrade to our core platforms but we are also looking at a couple of acquisition opportunities to give us increased firepower," he said.

The rumour mill suggested Six Degrees has been casting its eye over a datacentre provider in the South-East, which would fit in with the firm's strategy of owning the assets it uses to create and build its services.

"We are constantly looking at potential bolt-on acquisitions which can expand our reach and bring new services to the group," said Williams.

Integration of the 12 acquired companies is now 85 to 90 per cent complete, Williams added.

"We are not a conventional buy and build," he said. "We bought 12 assets that were growing businesses with good technology and great people, and integrated them gently. We have always been an organic growth vehicle and have always had at least double-digit underlying organic growth. And we have recruited 80 people since we started."

The noughties saw several IT services outfits perform private equity-backed roll-ups, with the recent collapse of 2e2 serving as a reminder of the dangers inherent in a highly leveraged buy-and-build strategy.

Six Degrees is one of a new breed of buy-and-build outfits operating in the datacentre space – another example being Pulsant – but Williams stressed that his firm operates a lower-risk model than 2e2 did, is operating in a higher-margin sector and, crucially, is growing.

"2e2's leverage levels were high. We are sitting at a fairly comfortable two times EBITDA debt level and are growing fairly quickly," he said.

"Pulsant is pretty similar to us but they have bought bigger companies for higher multiples. Ours have tended to be smaller companies with an average turnover of £5m and 12 staff, and the multiples are always lower [for smaller firms]. Even though they are leading edge, we haven't had to pay a big price for any of them. One of our rules is we won't overpay and we won't make acquisitions that risk breaking our model - we won't buy a £50m-turnover distressed asset because it's cheap."