Connect won't pay rivals' inflated prices in £100m M&A play

MBO leader Alex Tupman explains how his new venture will take a nimble approach to acquisitions

AT Communications founder Alex Tupman is launching another buy-and-build play with Connect Communications, and claims a nimble approach to acquisitions and service delivery will set it apart from its rivals.

Backed by private equity shop Lloyds Development Capital (LDC), Tupman this week led a management buyout of the London-based unified communications (UC) specialist. The company is to embark on an M&A offensive during the next half-decade in pursuit of creating a £100m-revenue managed services player. The firm's most recently available accounts, for the 2012 calendar year, reveal that it banked pre-tax profit of £470,364 on revenue which grew 5.8 per cent to £8.2m.

"We have a number of other targets that we are looking at, not just in telephony and UC, but potentially across the IT infrastructure. That is a key focus for us," Tupman told CRN. "We want to get the business to a certain scale and size where it becomes attractive - this is a four- or five-year plan where we are looking to transform the business from more of a UC specialist to more of a managed services specialist, looking at [areas such as] cloud applications and BYOD."

Tupman asserted that Connect will take a more agile approach to acquisitions than some competitors, and accused rivals of overpaying for deals.

"It is [going to be about] realistic multiples. What we are interested in is customers, and we will focus on acquiring customers and contracts that we can cross-sell [into], and there will also be some additional skills we will want to acquire," he said.

"But we are not in the market of paying over the odds in the way that a lot of competitors have done - [some of whom have] paid 20 times [EBITDA]. We will be very selective and will look at contracts and business assets as well as share capital."

No rush
The former ATC chief claimed that he has been looking for a company to invest in for a while, and claimed that Connect was an attractive target because of its "asset-light and technology-rich" nature. Connect employs just eight engineers, claimed Tupman, but can provide more or less global coverage via automation and third-party partnerships.

Of the existing leadership team, operations chief Andy Thomas and commercial leader Arman Khan are to depart the firm, the latter after a handover period of a couple of months. Finance director David Rose and technical boss Martin Cross will remain in place. Tupman (pictured right) added that he can also call on the expertise of LDC, but stressed that the investment house will leave the senior management team to run the business.

"LDC have an awful lot of resources and capability that we can call on and we will certainly be keen to use their assets, but it will be very much at our discretion," he explained. "The typical telephony operator is a single-digit [margin] EBITDA business and is very much focused on the UC specialism. We think we can take what is a very unique specialism into other areas, and we will do that very strategically - we are not going to rush it."