2e2 tables £58m offer in bid to acquire Netstore


2e2 tables £58m offer in bid to acquire Netstore

Microscope contributor

The CEO at 2e2 has revealed the £58.1m bid to acquire Microsoft Gold partner Netstore - should it go through - will add the finishing touches to its buy and build strategy, for this year at least.

On Tuesday, it emerged 2e2 had received irrevocable undertaking and letters of intent to vote in favour of the acquisition from over 70% of Netstore's shareholders - a deal that could take up to eight weeks to complete.

"We are delighted about the deal and hope it forms one of the final pieces of our jigsaw," said Terry Burt, CEO at 2e2. "That is not to say we will not buy again, but the velocity of acquisitions has slowed to one a year."

Since launching in August 2002, 2e2 has acquired 14 businesses, most recently Compel in March 2007 for £52.9m, though it spun out the leasing arm Hamilton Rentals in a management buy-out last month.

Concluding a deal with Nestore would give 2e2 Catalist accreditation, take its recurring revenues to 33% and push services to over 70% of sales.

The other rationale for buying the company is to extend Netstore's security and expert services and infrastructure consulting businesses among 2e2 customers, areas where Burt acknowledges it has been weak.

In the current climate, securing funding to acquire companies is not the walk in the park it was 12 months ago and some may argue £57m is not exactly loose change, but it represents an EBITDA multiple of 9.

"If we put some synergies through that we intend to and do certain other things, it will be less than 5 times EBITDA - given that we have a marginal rate of 10 to 11, I think it will end up looking like a smart deal," Burt claimed.

In a statement, Paul Barry-Walsh, executive chairman at Netstore, said becoming part of a larger organisation - 2e2 achieved £240m revenues in 2007 - would allow it to grow at a speed not possible on its own.

Interim results for the six months ended 31 December 2007 showed Netstore made a loss before tax of £300,000 on revenues of £19.7m.

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