Eurotel Holdings Ltd (United Kingdom) - Nov 2007

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01 November 2007

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Inflexion Private Equity has acquired telephony services business Eurotel Holdings Ltd in a £44m secondary management buyout from Young Associates. Inflexion invested £21.25m to take a majority stake in the newco. Young Associates retains a 16% shareholding alongside management, which holds the balance. Lloyds TSB Corporate Markets committed debt facilities of £21.25m to support the deal. Inflexion first looked at the company when it was up for sale two years ago. It has since tracked the business and four months ago made an offer to Young Associates, pre-empting a sale process. The deal took approximately two months to complete from exclusivity. Inflexion was attracted to the deal due to the strong management team and the fact that the company is a market leader in what is a dynamic market – the SME telephony market, which in 2006 spent £2.6bn on telephony services. Eurotel is well-placed to respond to growing demand from SMEs, as businesses increasingly look for multiple products in terms of fixed line, mobile line, BlackBerry servies and so on. Additionally, Eurotel has a track record of making acquisitions and Inflexion is anticipating opportunities to consolidate the industry using Eurotel as a platform for acquisition. Exit deal Young Associates has not disclosed the returns generated from its two-year hold of the company. Since Young Associates acquired an 83% stake in Eurotel in a £19m management buyout in 2005, the company has made three acquisitions (1 August 2005, page 25). In addition to the acquisitions, Young Associates also helped the company to grow by introducing a new CEO and financial director in 2006. As the company developed critical mass, Young Associates believed it needed an investor with more firepower to fund Eurotel’s rollout and agreed a valuation with Inflexion, which involved it retaining a 16% stake.

Company

Eurotel was founded in 1995 and operates from two sites in Halifax and Coventry. Its core product and service range includes phone systems, systems maintenance, fixed lines and calls, mobile lines and calls, fixed line data services, mobile data services and IT services. It has more than 15,000 customers. Eurotel also acts as a conduit for the products and services between wholesale operators and SMEs. Eurotel employs 300 people.

People

Andrew Mainwaring and Simon Turner led the deal for Inflexion and will join the board of the company. Yoav Kurtzbard and Simon Alberga led the deal for Young Associates. Kurtzbard retains a board seat. Neil Price and Adrian Peckham led the deal on behalf of Lloyds TSB Corporate Markets. Chris Jagusz is the CEO of Eurotel.

Advisers

Purchaser - Grant Thornton, Stephen Quest (Tax)Purchaser - Intuitus, Calum Stewart (Technical/IT AdviceUnspecified)Purchaser - Jones Day, James Goold (Legal)Purchaser - KPMG, Mark Farlow, Neil Conaghan (Corporate Finance)Purchaser - Marsh, Richard Worker (Insurance Due Diligence)Vendor - Addleshaw Goddard, Dee Sian (Legal)Vendor - Investec Investment Banking, James Sandford (Corporate Finance)Vendor - KPMG, Graham McConnell, Philip Abram (Other Due Diligence)Vendor - Oakley Corporate Finance, Chris Godsmark, Christian Maher (Corporate Finance)