Telefónica Tech acquires Microsoft Dynamics partner Incremental for £175m

Acquisition follows that of Cancom’s UK&I business last year

Telefónica Tech has announced the acquisition of Glasgow-based Microsoft Dynamics partner Incremental for up to £175m.

The transaction value represents 13.7 times Incremental's gross operating profit and 14.2 times its operating cash flow.

It includes contingent payments linked to the company's future performance and Telefónica Tech claims the deal will "strengthen its capabilities and presence" both in the UK and Ireland.

Based in Glasgow but with offices in India and Bulgaria, Incremental also focuses on the data and analytics market and has been a Microsoft Business Applications Inner Circle member for the past three years. It also acquired data analytics company Adatis last year.

"We warmly welcome Incremental Group and are delighted that this acquisition enables us to strengthen our position as a leader in the UK market for IT services," José Cerdán, CEO of Telefónica Tech, said.

"We are now able to provide end-to-end Microsoft services, including digital transformation, managed services and data analytics, and achieve attractive cross-selling synergies with Telefónica Tech UK&I, complementing and positioning us as a leading Microsoft-focused company in the UK."

With the addition of Incremental, Telefónica Tech now has 16 Gold-level competencies and five advanced-level specialisations with Microsoft, making it one of the vendor's largest partners in the UK.

The IT services arm of Spanish telco Telefónica has continued to focus its efforts on expanding in the region in recent years and last year acquired the UK and Ireland operations of Cancom for €398m.

Speaking to CRN last month, the company's UK&I boss Martin Hess said the group was targeting more M&A as it aimed to take its UK&I operations past the £200m revenue mark.

The acquisition adds 350 employees to the company's headcount to take its total to over 1,000, representing more than 25 per cent of TelefónicaTech's global workforce.

The transaction values the company at 13.7 times its gross operating profit and 14.2 times its operating cash flow, considering Incremental's results expected for the next fiscal year and excluding potential synergies.

Neil Logan, CEO at Incremental Group, says: "I am immensely proud of what Incremental has achieved since our inception a little over five years ago.

"As we looked ahead to the next stage of our development, it was important that we secured Incremental the right support for the long term.

"Becoming part of Telefónica Tech propels us into the next phase of our journey and enables us to further scale the business, creating exciting opportunities for our people and our customers."