Graphite Capital exploring Babble exit via DC Advisory

Dominic Pasteiner , Gustav Hoejmark-Jensen , Charlie Taylor-Kroll and Min Ho
28 July 2023

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Graphite CapitalТ has appointedТ DC AdvisoryТ to explore a potential sale of portfolio company and cloud communications technology specialistТ Babble, four sources familiar with the situation toldТ Unquote sister publication Mergermarket.

No final decisions on timing have been taken, the sources said. A sale might not take place until the beginning of next year to allow more time for the company to integrate its most recent acquisitions, one of them said.

London-based Babble is set to be marketed off GBP 25m-GBP 30m EBITDA for 2023, a number which has grown on the back of the company's recent M&A rollup strategy, two of the sources said.

The Babble group of companies, formally known as Dvorak Topco Limited, recorded gross profit of GBP 27m off GBP 56m turnover in the year ended 30 November 2022, versus GBP 17m profit off of GBP 34m turnover the previous year, according to financial filings.

Private equity-backed strategic players and sector consolidators would make natural suitors for Babble, a fifth source added.

Babble has a score of 70 according to Mergermarket's Likely To Exit (LTE) predictive algorithm.*

Graphite backed a management buyout of Babble from sponsor LDC in November 2020. LDC retained a minority stake in the company following the transaction, which valued the asset at GBP 90m.

The company is highly acquisitive. It completed at least five acquisitions during 1Q23, including UK-based technology companies TechQuarters and Stonegate, and aims to strike over 11 total acquisitions this year, according to a March report from this news service.

Babble provides cloud-based business-to-business communications, IT and cybersecurity services to small and mid-sized UK corporates, according to Graphite's website. The company's competitors include Focus Group, Arrow, OneCom, Wavenet, Chess, Elite and Daisy, per the same Mergermarket report.

This news service reported in June that Focus Group's owner Bowmark Capital had appointed Houlihan Lokey to explore a potential sale of the IT solutions company.

DC Advisory, Graphite Capital and LDC declined to comment. Babble did not respond to a request for comment.

*Mergermarket's predictive analytics assign a score to sponsor-backed companies to help track and predict when an exit could occur through M&A, an IPO, a direct listing, or a deSPAC transaction.