Kelway in talks to acquire ISC Computers

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Kelway in talks to acquire ISC Computers

Microscope contributor

Kelway is understood to be locked in negotiations to acquire Cambridgeshire-based ISC Computers.

This would represent the fifth acquisition for Kelway, which began a buy and build strategy in the summer of 2007 when it bought Elcom out of administration and continued in calendar 2009 with Panacea Services, Repton and SAM Practice.

"Kelway needs to continue buying to match the [management's] growth ambitions and ISC is looking for a buyer," claimed a channel source.

Sales at ISC Computers were down nearly 3% to £50.9m in fiscal 2009 as profits grew 10% to £279k. Staff headcount fell from 323 to 289 with a small number of job cuts across sales, administration, technical support and engineering.

Sources added that Kelway's interest in HP and Microsoft Gold partner ISC centred on its annuity revenues streams derived from managed, resource, support and continuity services.  

But the investment in its own data centre is also another string to ISC's bow as are the storage, virtualisation and virtual desktop divisions.

Management at Kelway had set ambitions to become a £250m turnover business and are closing in on that target, with a run rate that is tracking close to £230m in the current fiscal year that ends 31 March 2011, clearly a deal with ISC would take the firm beyond that goal.

In the numbers for fiscal 2010, London-based Kelway grew EBITDA 97% to £8.3m as sales climbed 61% to £178m. Retained profit for the year was £4.1m, up from £1.7m in the previous year.

Services accounted for one quarter of gross margin for the 12 months, product provision represented another 25% and IT solutions made up the rest.

At the time the results were reported, Kelway CFO Craig Compton said it had options to fund future expansion; gearing the balance sheet more heavily, utilising operating cash flow or asking VC partner Core Capital LLP to stump up the funds.

Kelway refused to comment and ISC Computers was unavailable to comment.

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