Technology firm Iomart made its biggest acquisition today as it splashed out £23 million on an English rival in a bid to accelerate its growth.
The buyout of Leeds-based “disaster recovery” specialist Backup Technology (BTL), which boasts both Liverpool and Everton football clubs as clients, follows Iomart’s £8.1m purchase of another English firm less than a month ago.
The move came as chief executive Angus MacSween cashed in £10m worth of shares in the company he founded in 1998 alongside his brother-in-law Bill Dobbie.
The pair – both serial entrepreneurs – initially invested about £1.5m in the business, and raised a further £19m with Iomart’s float on the Alternative Investment Market in 2000.
The Glasgow-based cloud computing group has grown both organically and by hoovering up many of the smaller operators in its rapidly emerging field, and is now valued at almost £300m on the stock market.
The firm is one of the largest cloud computing providers in Europe and is projected to make pre-tax profits of more than £20m in the current financial year.
MacSween’s sale is though to reduce his stake to a just under 16 per cent, from 19 per cent previously.
Two other directors also sold shares in the accelerated placing, which the company said would allow MacSween to rebalance his portfolio and utilise his entrepreneurs’ relief.
Sarah Haran, who heads the firm’s web hosting businesses, sold £1.05m worth of shares while finance director Richard Logan offloaded £750,000 of shares.
MacSween has agreed not to sell any further shares “for the foreseeable future” and no earlier than the release of the publication of the final results for the year ended March 2015.
The group said the sale will have the “additional and material benefit of increasing both the free float and the liquidity of the company’s shares”.
Iomart also provided a brief update on trading today, saying the first half of the year had been “substantially ahead” of last year as the market increasingly shifts toward the provision of products and services over the internet. The group will pay for BTL with an initial £17.5m in cash and £3.5m in new shares. A further £2m is payable in cash on 31 January 2014.
The deal has been financed by a £35m debt package from Bank of Scotland.
MacSween said: “We are pleased with the continuing strong performance of Iomart. The addition of BTL to the group will further broaden and diversify our cloud-based offerings and enhance our position in the market.
“I look forward to the second half of the year and remain very confident in the growth prospects of the business.”
Today, broker Canaccord Genuity downgraded Iomart’s shares from “buy” to “hold” and said the latest acquisition looked “pricey”, although it stressed that the firm is “still very attractive”.
Analyst Jonathan Imlah said: “Over the past few years Iomart has been a story of solid organic growth, supplemented by one or two in-fill acquisitions a year.
“This acquisition arguably signals a shift in strategy to slightly larger deals of the kind that management has shunned in the past as they were too expensive.”