iomart's latest buy shows MSP valuations are 'fruity'

iomart is paying up to £11m for its latest conquest, Hemel Hempstead-based hosting firm United Hosting

iomart is continuing to play consolidator in the cloud hosting market as it announced its second acquisition of 2015 at a valuation one analyst described as "fruity".

Following on from its purchase of public cloud consultancy SystemsUp in June, iomart is laying down £7.5m in cash upfront for United Hosting, whose main datacentre is in its home town of Hemel Hempstead.

United Hosting's two founders have agreed to remain with the business and a further £3.5m will be paid if the firm hits pre-agreed EBIT performance targets in the years to April 2016 and 2017. This propels the total outlay to a maximum of £11m.

Anthony Miller, managing partner at analyst TechMarketView, said the potential acquisition price "may look a little fruity at first blush" given United banked an EBIT of £1.3m in its fiscal 2015, on sales of £2.4m.

However, AIM-listed iomart is in a bullish frame of mind, having recently declared itself "very pleased" with its first-half trading, the results for which are due out tomorrow.

Hosting is by far iomart's largest activity, generating over 80 per cent of its £65.8m sales in its fiscal 2015 as a string of acquisitions - including Redstation, Backup Techonlogy and Server Space - boosted its business in this area.

Founded in 1998, United Hosting provides managed, dedicated and shared hosting services and domains to about 6,500 mainly small-business customers. Besides its Hemel hub, it also leases datacentre space in London, Dallas and Texas.

Angus MacSween, chief executive of iomart, said: "In line with previous acquisitions made by iomart, United Hosting is a profitable, growing business whose services reflect those we offer. As such, the business fits well within our acquisition criteria and will be a valuable addition to the Group."