Demerger values telecoms business at £1bn ahead of likely flotation

Terry O'Brien

Nelson-based Digital Wholesale Solutions (DWS) has agreed a strategic partnership with private equity firm Inflexion which sees Inflexion make a significant minority investment in the business.

The deal is seen as a precursor to the likely independent public offering (IPO) of DWS.

As part of the transaction, DWS will be demerged from Lancashire telecoms specialist Daisy Group, with the majority of the shareholders of Daisy Group reinvesting directly into DWS.

The demerger, which values DWS at £1bn, is the final step in separating DWS from the Daisy Group and secures more than 200 jobs.

DWS is a high growth, channel-only software platform business providing IT, communications and cloud products and services on a wholesale basis to more than 6,000 UK partners, from vendors including Vodafone, O2, BT/EE, Microsoft, TTB and Virgin Media Business.

Its services are targeted at resellers serving SME’s in the 10-250 employee range.

As an independent entity DWS can further pursue its strategy of being the partner of choice across the industry, with its integrated platform enabling resellers to provide the very best in IT, communications and cloud solutions to their customers.

DWS’s chief executive, Terry O’Brien, will remain in post, leading the business with the support of his existing management team. The business will continue to operate its clear, and simple, customer-first, channel-focused model.

Mr O’Brien said: “The announcement today is brilliant news for DWS, brilliant news for our vendors and, most importantly, brilliant news for our partners. From the get-go, it was clear that Inflexion shared our excitement about the UK channel community and the huge potential for growth as SME’s increase their investment in digital technology.

“I’m delighted that Inflexion is joining our team, where we are obsessed with building a great channel-only business, delivering great products and a great experience for partners through a great platform.”

A statment by Inflexion said: “DWS is a great fit for Inflexion’s portfolio. There are many things that we like about the business – it is a strong, growing, entrepreneur-led business, operating in a resilient sector, delivering recurring revenues on a proprietary software platform, with an excellent management team and an excellent reputation and high customer satisfaction.

“This is a perfect recipe for the public markets – Inflexion has long experience in backing entrepreneurs with pre-IPO fund raising and we are looking forward to working with Terry and his team to de-leverage DWS and advise and guide as it prepares for a successful IPO.”

Matt Riley, founder of Daisy Group, who has agreed to sell a stake in DWS and will remain as its chairman, said: “In a fast moving, dynamic, highly competitive market, with customers demanding more from their partners, we made a strategic decision to separate our direct and indirect businesses to provide better focus and agility.

“The change has re-ignited the growth in all our businesses and today’s announcement is the next step on that journey.”

He said: “We made the strategic decision to separate DWS from the Daisy Group over two-and-a-half years ago in order to allow the relevant divisions to concentrate on growth.

Matthew Riley

“This, coupled with the simplifying of how we go to market, has enabled DWS to gain market leading organic growth.

“The opportunity for the channel to take more share of the UK market over the next five years is unprecedented.”

He added: “It was very important that jobs were secured within the deal and am proud to say that this is the case, with a lot of scope for further development and recruitment down the line. It really is fantastic news for the Lancashire area.”

And he said: “I’m delighted to welcome Inflexion on board, who from first introduction recognised not only the quality of the DWS business but also its huge potential to grow in really exciting market conditions.”

Simon Turner, managing partner of Inflexion, said: “The business Matthew and his team have built up is testament to what the hard work of an ambitious entrepreneur can achieve.

“DWS is exceptionally well placed to continue its organic and acquisition-led growth as it builds its market position further. We look forward to partnering with Matthew, Terry and the whole DWS team as they continue on their impressive journey.”

The investment is subject to regulatory approval.

The principal advisors for DWS were Oakley Advisory, EY (financial and commercial due diligence) and Eversheds Sutherland (legal).

Principal advisors for Inflexion were Alantra (advisory), PWC (financial and commercial due diligence) and Travers Smith (legal).

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