FluidOne to hit M&A trail as it looks to expand into the north of the UK
Russell Horton speaks to CRN about M&A strategy and why he sees growth potential in customers that have gone bust
FluidOne intends to make at least two further acquisitions this year and wants to expand in the north of the UK, according to CEO Russell Horton.
The network aggregator was itself bought from The Rigby Group by private equity firm Livingbridge in 2019 which supplied it with a war chest to scale its operations. It made its first acquisition last October with PSU Business Technology and made its second purchase last year in the form of Cyber Security Associates.
Horton said that its M&A strategy was delayed by the outbreak of COVID-19 last year but that some of that pipeline is now being picked up, PSU being one of those delayed acquisitions.
"We paused for COVID and then we're now back into full speed [with acquisitions]," he told CRN.
"In this calendar year, I'm hoping to do another two this year minimum and then two a year going forward - but they've got to be the right strategic fit.
"Our focus is on the UK and we're already nationwide in terms of our network and our customers. I'd be interested in making acquisitions in the North to give me a more local sales presence. Geographically, I'd rather it was spread out further than central London."
Horton is optimistic about the future of networking and connectivity post-pandemic, stating that he is seeing higher multiples in the market now compared to what they were pre-COVID. This is due to industry expectation that stalled projects will accelerate post-pandemic.
"We're finding acquisitions multiples are higher than pre-COVID in this space because everyone is betting on the fact that it's going to increase this transformation speed and is going to increase the adoption of these projects," he stated.
"I think there'll be a big pickup in investment in home working with the money customers save in the office, and we have offerings for those. I see it as a great opportunity - I think we'll end up growing faster than before COVID."
Despite its M&A activity, the pandemic has affected FluidOne's revenue growth. It reported a turnover of £31m for its year ending 31 March 2020, and Horton revealed that it is currently at £37m revenue run rate.
He added that FluidOne has over £5m in its pipeline, as customers continue to stall on projects until they get the nod from the government as to when lockdown restrictions will be eased
"The biggest impact on business really has been that a lot of customers haven't decided yet - or are only now deciding - what they're going to do strategically on their buildings and therefore the connectivity they require," he said.
"It means a lot of the sales projects are open but delayed or on hold. We've got probably the biggest pipeline we've ever had; we've got over £5mof margin in our pipeline and sales at the moment.
"But a lot of that has been there for a few months because customers are saying ‘I want to do the project, but I need to work out when the UK is coming out of lockdown to decide when to execute'."
A number of FluidOne's customers are in industries most impacted by the pandemic, such as retail and hospitality, with some going bust and being snapped up by rivals. Horton sees this as an opportunity to integrate FluidOne with these new owners and use it as an opportunity to widen its customer base.
"About 15 per cent of our customer base or our channel's customers are in sectors most hit by recent events," he explained.
"Carluccio's and the National Accident Repair Centre were both customers of ours and they both went bust. The people that then acquired them out of administration have taken our services with them. We've now a chance to upsell because when they have worked with us and see what we're doing, they're really impressed. We've now got a chance to expand our customer based wider than we had with the customers [that went bust] that they took over."