REG - Gamma Communications - Gamma agrees to acquire STARFACE

Gamma CommunicationsAnnouncement

14/01/2025 07:00

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RNS Number : 1691T  Gamma Communications PLC  14 January 2025

14 January 2025

 

Gamma Communications plc

 

Gamma agrees to acquire STARFACE

 

Gamma Communications plc ("Gamma"), a leading provider of technology-based
communication services across Europe, announces that it has reached an
agreement to acquire the entire issued share capital of SF Technologies
Holding GmbH (the "Company", trading as STARFACE), subject to customary
regulatory clearance (which is expected to be received within two months).

 

Delivering on our German strategy

 

Germany holds strategic importance for Gamma, as it represents the largest,
and growing, cloud PBX market in Europe, with significantly lower cloud
penetration in a larger SME market than the UK. The acquisition of STARFACE
delivers on our strategy to establish a new anchor in the European business,
alongside our well-established UK business.

 

Gamma has an ambition to be the leading challenger to the incumbent
telecommunication providers, Deutsche Telekom and Vodafone Germany, in the
German cloud communication market. Gamma entered the German market through the
acquisition of HFO in July 2020. In September 2024, Gamma further expanded its
presence through the acquisition of Placetel, a German Cloud PBX¹ ²
provider, enabling German companies to buy Cisco Collaboration solutions both
digitally and through local partners.

 

Founded in 2005, STARFACE is a market leader in the provision of proprietary
business communication and collaboration software solutions, tailored to fit
the needs of the German market. The company predominantly serves SME
businesses in Germany, as well as enterprises and the public sector via its
nationwide channel partner network, which also covers Austria and Switzerland.
Headquartered in Karlsruhe, Southwest Germany, the business has additional
offices in Munich and Starnberg and employs around 260 people. An experienced
management team is led by founder Florian Buzin, who will continue to lead the
business.

 

Acquisition rationale

 

The acquisition positions Gamma as a market leader in the German SME cloud
communications market. It will provide an additional 210,000 cloud PBX seats
which increases Gamma's number of cloud seats sold in Germany to over 500,000.
This represents approximately half the number of cloud seats that Gamma
currently has in the UK, which is a more developed cloud communications
market. This acquisition complements Gamma Germany's SIP³ business and
Placetel's digital first approach.

 

STARFACE has a focus on transitioning on-premise SIP PBX users onto cloud
solutions and still has a hardware PBX base of approximately 360,000 seats,
using a proprietary hardware solution which can be seamlessly converted to a
cloud solution over time without the need for manual intervention.
Furthermore, STARFACE offers solutions which help to bridge the gap between
hardware-based solutions and cloud solutions.

 

It will also bring key partner relationships, with STARFACE's network of over
2,000 channel partners enhancing Gamma's existing distribution network, and
significantly increasing our reach into the German SME market.

 

Consideration

 

STARFACE is being acquired, excluding transaction costs, for a cash payment of
€196m (c.£165m) for the purchase of 100% of the equity of the Company on a
debt-free / cash-free basis.

 

The acquisition is expected to be primarily funded through approximately
£125m from Gamma's existing cash resources, with the remaining £40m funded
through a new £130m multicurrency Revolving Credit Facility. The undrawn
portion of the facility will be available for further uses, in line with
Gamma's balanced approach to capital allocation. The debt facility will have a
three-year term, with an option to extend for an additional 12 months.

 

STARFACE Financial Performance

 

For the year ended 31 December 2024, STARFACE is expected to deliver unaudited
consolidated group revenues of approximately €44m and Adjusted EBITDA of
approximately €15m. These figures are presented on an IFRS pro forma basis,
to reflect a small acquisition made by STARFACE in November 2024.

 

The business has a historical growth track record, with a high single digit
CAGR for reported EBITDA from FY22 to expected FY24, and a similarly high
operating cash conversion to Gamma. Gamma anticipates an increased near-term
investment in the business in 2025, with both integration costs and plans to
accelerate the transition of customers from non-recurring licence sales to a
recurring SaaS model. In 2024, recurring revenues accounted for approximately
70% of total revenue. The acquisition is expected to be accretive to Adjusted
EPS in FY25. Given the potential timing of the closure of the transaction, the
Group expects to disclose the provisional accounting for the acquisition in
the H1 2025 interim results. Purchase price accounting adjustments are
expected to include goodwill, intangible assets and deferred revenue.

 

Andrew Belshaw, Chief Executive, Gamma, commented:

"This acquisition marks a significant milestone for Gamma as we further
strengthen our position in Europe's cloud communications market. By combining
STARFACE's strong partner ecosystem and technical expertise with Gamma's
established connectivity capabilities, we're delivering unmatched value to our
customers and partners. Together, we're not only strengthening our position in
the German market but also shaping the future of business communications for
SMEs across Europe."

Florian Buzin, Chief Executive and founder, STARFACE, commented:

 

"We are thrilled to join forces with Gamma, a company that shares our vision
of empowering SMEs with cutting-edge communication solutions. This partnership
builds on STARFACE's legacy of innovation and channel excellence while
unlocking new opportunities for growth and collaboration. Together, we are in
an excellent position to lead the next chapter of cloud communications in
Germany and beyond."

 

¹ Private Branch Exchange (PBX) is a private telephone network used within a
company that connects calls between internal users, and allows them to share
and utilise external phone lines. Traditionally a PBX would be hardware based
and connected to the wider telephony network through a SIP trunk. Increasingly
they are provided in the cloud.

² Cloud PBX is a virtual PBX system rooted in the internet, which
automatically answers all calls and routes them to the right department or
user extension.

³ Session Initiation Protocol (SIP) is a signalling protocol, widely used for
voice and video calls over the internet.

 

This announcement contains inside information. The person responsible for
arranging the release of this announcement on behalf of Gamma is Rachael
Matzopoulos, Company Secretary.

 

 Enquiries:

 Gamma Communications plc                         Tel: +44 (0)333 006 5972

 Andrew Belshaw, Chief Executive Officer

 Bill Castell, Chief Financial Officer

 Rachael Matzopoulos, Company Secretary

 Peel Hunt (NOMAD & Broker)                       Tel: +44 (0)207 418 8900

 Neil Patel / Benjamin Cryer / Kate Bannatyne

 Deutsche Numis (Broker)                          Tel: +44 (0)207 260 1000

 Simon Willis / Hugo Rubinstein / Spencer Clark

 Teneo (PR Adviser)                               Tel: +44 (0)207 353 4200

 James Macey White / Matt Low / Ffion Dash

Notes for editors:

Gamma Communications plc is a leading provider of technology-based
communication services across Europe. Gamma is admitted to trading on AIM and
employs approximately 2,000 people. Offering a range of Unified
Communications, mobile, security and connectivity services, Gamma provides
robust and secure end-to-end business communication solutions, enabling
organisations to communicate, collaborate and offer a better customer
experience.

Gamma's vision is for a better-connected world in which it can work smarter
for the benefit of business, people, and the planet. Its primary market is the
UK, where it delivers network-based services to SME, Public Sector, and
Enterprise markets through its extensive network of trusted channel partners
and direct sales and support capabilities. Expanding its presence in Europe,
Gamma is continuing to grow its group of businesses focused on digital
transformation by delivering services to customers via a network of channel
partners in Germany, Spain, and the Benelux region.

For more information about Gamma and its comprehensive range of products and
services, please visit www.gammagroup.co (http://www.gammagroup.co)

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