CSI says several suitors were circling ahead of MML deal

£50m-revenue IBM and SAP partner says its managed services transition has made it an attractive target as it takes on more investment

The boss of CSI says its successful transition from reseller to MSP had put it on the radar of several potential acquirers as he talked through the firm's change in ownership.

CSI this morning announced it has taken on investment from MML Capital Partners in a deal valuing the IBM and SAP partner at an estimated £80m.

This will see MML replace Blackhawk Capital - the investment vehicle that acquired CSI in 2012 and that is owned by CSI executives Alan Watkins and Kevin Lewis - as CSI's private equity owner.

Talking to CRN, CSI executive chairman Alan Watkins (pictured) said the injection of funds would allow his firm to continue investing in organic and acquisitive growth.

Following its acquisition of MSP APSU last November, three-quarters of CSI's business is now generated by managed services, Watkins said, an attribute he said has turned heads in private equity circles.

"We were approached by MML in March and they had been tracking us for a while, as have several people over the last year because of the success we've had in transitioning to managed services," Watkins said.

"We are becoming quite an attractive target, but Kevin and I were very keen to continue growing and complete this transition to managed services. The acquisition we did of APSU last year was the most significant piece of the jigsaw to take us to a place where 75 per cent of our business comes from managed services, so we regard ourselves now as a true managed services player.

"The investment MML has made gives us a significant opportunity to expand the business and make more acquisitions at a time when many resellers are struggling with this transition."

CSI's revenues are on course to hit in the region of £50m in its current financial year ending 31 December, with EBITDA slated to almost double to £9m, Watkins said.

Despite Blackhawk no longer being involved, Watkins said he still has a personal investment in CSI.

Analyst Megabuyte estimates that the deal values CSI at £80m, compared with the £15m it estimates Blackhawk paid for CSI five years ago. That would imply an EBITDA multiple of close to nine.

CSI operates across the markets of cyber-security, software services and infrastructure services, and Watkins hinted that its acquisition activities in the second half of 2017 will focus on the first of those three areas.