When growth proves hard to come by, the simple answer for many companies is to look to buy. The top end of the UK technology, media and telecoms sector has become a lonely place, with only the biggest names to choose from — but smaller players have proved more adept at scooping up rivals.
Gamma has been the quiet achiever in UK telecoms since it floated at 187p in 2014 — the shares have more than quadrupled and now trade at around 821p, giving the company a market capitalisation of £743m.
It has made a virtue of keeping things simple and focusing on cash, which is why it was a surprise when it unveiled an acquisition in the Netherlands this month. “Nobody expects the Dutch acquisition”, quipped Megabuyte, the research company.
The deal was the first move of new chief executive Andrew Taylor — formerly of billing systems group Intec, who replaced long-serving boss Bob Falconer in May — and Gamma’s first significant acquisition in six years. It will pay a maximum consideration of €27m to acquire Dean One. The deal will be immediately earnings enhancing, and Gamma says the Dutch market offers more growth potential for the types of products that it specialises in — such as SIP trunking, which connects internet calls to public telephone networks.
Gamma is expected to increased revenue by 16 per cent to £277m and earnings before interest, taxation, depreciation and amortisation by 11 per cent to £46m in 2018, according to Megabuyte.
Accesso’s acquisition of Ingresso last year may have been a tongue twister for headline writers, but the £28m deal took the UK company into ticketing distribution.
That strategy took a further step this month when the combined business revealed that it had partnered with Google to allow people to book tickets to events using Google Maps, Search and Assistant.
Accesso started life as Lo-q, which was a system designed to allow people to reserve their place in a queue at a theme park — for a cost — without having to stand in line.
Over the past decade it has moved on from toying with ideas of how to expand that concept, such as targeting the queue at a deli with its software, to how to engage better with customers, especially those willing to pay extra for convenience. The move to introduce a “reserve with Google” is the latest iteration of that plan.
Revenue for the six months to June increased 17 per cent to $54.4m, or 47 per cent on an underlying basis, while profit before tax dropped 12.5 per cent to $1.4m due partly to acquisition costs.
Broker Peel Hunt argued that Accesso had only scratched the surface with existing clients such as Merlin and that the leisure market was growing more complex.
The Ingresso deal gives it exposure to London’s West End theatre market, while virtual reality and “escape rooms” — a new Crystal Maze-style entertainment concept — offer substantial growth opportunities.
Accesso shares have risen more than 20 per cent over the past year and trade at around £25.95, giving the company a market capitalisation of about £710m.
Minds + Machines
It could have been a case of acute embarrassment all round in May when domain name registry Minds + Machines Group (MMX) announced the acquisition of a Florida-based rival in a lucrative niche.
Aim-listed MMX specialises in domain names ending in geographies, occupations and lifestyles, including .london and .fashion. The $31m takeover of ICM Registry took it into a new area — adult domain names — as the target company controls the .xxx domain. There was a certain coyness in its stock market announcement in May revealing the deal — it took 20 paragraphs to detail to investors what ICM’s niche was.
The deal was signed off by Icann, the global body that maintains internet protocols, which approved the takeover in June.
ICM will add $7.3m in revenue and ebitda of $3.5m a year, which doubles the size of the company.
Before the ICM deal, MMX had spent a year weighing up whether it should sell up to a larger rival but instead decided to plough on and do deals itself. The shares have had a torrid time, however, and have almost halved over the past year to around 6.35p, valuing the group at about £51m.