British cloud computing vendor acquires Microsoft Azure partner Extrinsica

The deal was finalised with an initial consideration of £4m

Cloud computing vendor Iomart Group is acquiring Microsoft Azure cloud solutions provider Extrinsica for £4m.

The acquisition will provide Glasgow-based Iomart with Microsoft Azure expertise, a team of 33 based in the UK, customer references and a shared value and vision for how the Microsoft Practice in Iomart should be shaped to support acceleration of growth.

Simon Smith, CEO and co-founder of Extrinsica, will continue to lead the business as CEO.

"Joining Iomart marks an exciting phase for our highly skilled, experienced and ambitious team, providing us with a strengthened platform for growth," Smith said.

"It allows us to leverage joint capabilities, capitalise on our understanding of the markets we operate in and build upon our significant achievements to date.

"Iomart has a long pedigree in cloud infrastructure, an impressive customer base and a growth strategy which I believe positions Iomart well for future success."

The Oxford-based Microsoft Azure partner offers managed Azure Cloud, Azure solution design and implementation services, support and optimisation services and licencing.

In 2010, Extrinsica was incorporated as a cloud services provider to micro businesses.

And in 2017 its current business model was established when it was invited by Microsoft to become one of the first 25 Microsoft Azure CSP partners worldwide.

It is now solely Azure public cloud focused.

For the year ended 31 March 2023, Extrinsica generated revenues of £7.4m, representing year on year growth of around 40 per cent, and EBITDA of £0.1m (unaudited).

The acquisition is not considered a substantial transaction as defined in AIM Rule 12.

The deal

Iomart revealed that the initial consideration for the acquisition is £4m, with a potential further £0.3m in cash payable on the achievement of certain key customer targets during the calendar year.

Of the initial consideration, £2m will be satisfied by the issue of 1,562,500 new ordinary shares in Iomart, which under the terms of the sale and purchase agreement are subject to a 12 month "lock in" provision and based on a fixed share price of £1.28, being the volume weighted average price for the 90 days prior to completion.

The acquisition also includes a further £4m-to-£7m contingent earn-out payments which are calculated based on Extrinsica's profitability for the 12 months ending 31 March 2024.

Reece Donovan, CEO of Iomart, said: "We are delighted to welcome the Extrinsica team to Iomart, providing a large step forward in Iomart's capabilities to support existing and new customers in their use of Microsoft's Azure cloud platform."

"Smith and the team have been at the forefront of the market developments of Azure since 2017 and have deep skills and expertise in this in-demand area of cloud computing, which will accelerate the initial investments we have made in our own Microsoft resources and capabilities.

"This is a meaningful step in our strategy as we position the Group for its next phase of growth as a leading secure hybrid cloud business."

This is the latest of several acquisitions conducted by Iomart in the last few years.

The cloud computing vendor recently reported an expected revenue for the year ended on 31 March 2023 of be £115m - a marginal improvement from its previous year (£103m) - despite £7m rise in energy costs.