GCI Telecom Group (GCI Com) has received its first equity injection from an investor and appointed industry guru John Cronin as Non Executive Chairman. Business Growth Fund (BGF) has invested £10m in the midlands-based telco in a move that underscores the growth potential of the telecoms and IT services markets.
The new equity enables Lincoln headquartered GCI Com to pursue its organic growth and acquisition strategy in return for a minority stake in the company.
Cronin has particular expertise in growing and developing businesses in the technology and communications sectors, having held senior roles at Arqiva Broadcast, Azure Solutions, NetSource Europe, Teleglobe, Kast Telecom, Mercury Communications and BT.
GCI Com has a turnover approaching £65m and employs 220 staff across nine UK locations and the BGF investment comes on the back of a £22m funding boost from Barclays in October 2011, giving GCI a significant war chest to fund future acquisitions. The Group expects to make five or six strategic-fit acquisitions during the coming months and has already identified target buys.
Tim Whittard, Investment Director at BGF, said the investment met the company's strategy of working with highly motivated and focused entrepreneurs such as Wayne Martin, founder and CEO of GCI Com, who aims to create a £100m business within two years.
Whittard said: "GCI Com has scale, critical mass and significant potential to grow both organically and through further acquisition, which is in line with the developments in the market and customers' own requirements.
"The sector in which GCI Com operates is enjoying rapid growth due to the convergence of IT and telecoms, the move to cloud computing and corporate desire to outsource."
GCI Com was formed in 2000 and has grown rapidly through a mix of organic growth and 19 strategic acquisitions. Under Martin's leadership the company has become one of the fastest growing managed communication providers in the UK with a 68% CAGR over the last two years.
Private equity had not been on Martin's radar screen but the prospect of unlocking GCI Com's growth potential sent a clear signal to BGF. "They chose us," added Martin. "In the past we have relied on bank debt or company cash reserves to finance our growth. The thought of private equity backing had not particularly appealed. But BGF made us think differently."
BGF does more than inject growth capital. It offers guidance and access to a wide network of contacts and supports businesses to their next stages of development. Furthermore, BGF is a major new £2.5bn equity investment fund backed by five of the largest banks in the UK. All things considered, Martin found BGF's proposition too appealing to ignore.
Martin, who has been involved in the communications industry for 25 years, commented: "BGF's offer made good business sense. We have worked very hard over the last 12 years to build up a range of specialist services and wide network footprint to best service our customer base.
"I haven't ceded control of my business, but am in a stronger position because of their involvement as a partner and long-term equity investor to realise the ambitions that I have for it."
GCI Com is the first investment that BGF has made in the midlands. "We believe that there are many high quality businesses across the midlands, like GCI Com, which have real potential but which have not obtained the funding that they need," noted Richard Bishop, BGF Head of Investments. "We therefore expect this to be the first of many BGF investments in the region."
GCI Com provides inbound and outbound telephony and data services to medium sized corporates and smaller enterprises. Its blue chip customer base includes a diverse mix of companies from various sectors including construction, industrials, media, retail and distribution.
Martin added: "BGF's investment is a major milestone for GCI Com. It gives us the opportunity to significantly build scale and service diversity at a time when our clients need it and the market conditions are ripe for growth."
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Steve Harris, Managing Director, VCOMM