Azzurri buy was a pre-emptive strike, says Maintel CEO

Eddie Buxton reveals Maintel approached Azzurri to avoid the prospect of a bidding war, saying his rival was 18 months ahead of it in cloud journey

Maintel approached Azzurri in a "pre-emptive strike" to avoid losing out in a bidding war, its CEO has revealed as he cited Azzurri's prowess in cloud as the key motivation for a deal.

AIM-listed Maintel announced this morning that it is acquiring privately held rival Azzurri for £48.5m in a reverse takeover that will almost treble its revenues to a projected £140m.

Maintel CEO Eddie Buxton (pictured) admitted to CRN that Azzurri was "about 18 months ahead" in its cloud story through its ICON platform.

Azzurri launched ICON in 2011 on the back of a £1m investment, recently boosting the platform's resilience by announcing plans to open a fourth UK datacentre. It enables it to offer Avaya, Mitel and shortly also Microsoft to customers as a cloud or managed service.

Buxton said ICON was the pivotal rationale for the acquisition, which is set to close in early May.

"People have been talking about cloud for a long time and people have been dipping into it in unified communications but it's really starting to get traction. The ICON platform is very exciting and sets us up well for a long time," he said.

Buxton added: "Some of my peers in the market think Azzurri has a chequered history, and it has in terms of debt, but in terms of customers at the front end it has a fantastic reputation.

"And this positions Maintel as a really significant player - £140m is the same size as Alternative Networks, which opens up a whole new level of customer for us. That's why we made a pre-emptive strike. We approached them - it wasn't in a sale process."

The acquisition will also boost Maintel's visibility of revenues, Buxton said, with Azzurri's recurring revenue currently standing at 77 to 78 per cent of overall sales, compared with 70 per cent for Maintel.

Azzurri turned over £101.3m in its last financial year and Maintel £50.6m, and Buxton said the enlarged firm would have combined revenues of about £140m once the dust has settled on the integration. ICON now generates £30m of sales, he added.

Maintel is targeting £4.6m in cost synergies through the deal by 2017 and one of Azzurri's five offices - in East Kilbride, which has between 20 and 30-staff - will be closed fairly swiftly, Buxton said.

"In an acquisition like this, there are always synergies and overlaps but the combined cost of sale in this business is £70m," Buxton said. "So there's lots of cost of sale to go for [other than employees], for instance supplier rationalisation, bigger buying power and rationalisation of properties, and we don't need two lots of insurers or auditors."

The combined business will have 750 staff, Buxton said.

"There will also be overlaps in staff and there will be cutbacks. We've done some top-line planning but the detailed planning starts now, so I can't give numbers," he added.

Buxton, who will be CEO of the enlarged group, said nothing has been decided in terms of which Azzurri executives will stay on, including opposite number Chris Jagusz.

"Chris is running the business for now and we will sit down next week to talk about how we integrate the business. No firm decisions have been made," he said.

"Azzurri has gone through some pain in the past but Chris and [chairman] Steve [Andrews] have really positioned it well over the past 32 months. They've streamlined and professionalised it."

This is Maintel's third major acquisition in recent years and Buxton confirmed it will now take a break.

"I am swallowing a pill twice as large as my business and I want to get this right. We won't be actively looking for acquisitions for the next 12 to 18 months," he said.