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Hungry UK IT biz, VC firm to swallow former Ericsson arm Damovo – sources

Daisy Group to take UK ops, Oakley Capital the rest: tipsters

Privately owned Daisy Group is very close to making the British arm of comms integrator Damovo its 47th conquest, sources are telling us.

Lancashire-based Daisy pulled its shares off AIM last week and will next month take delivery of a new chief exec in the shape of outgoing Computacenter UK managing director Neil Muller.

A "for sale" sign was erected outside of Damovo’s HQ a couple of months ago when it appointed financial advisory and asset management firm Lazard to run the process.

People close to the talks tell us management has thrashed out the nuts and bolts of a deal, though they were unaware of the financial details.

Damovo is the former enterprise sales and services division of Swedish telco Ericsson. The UK business employs around 250 staff, and carries the Gold badge of certification for Microsoft and Cisco, selling voice and data networks and unified comms that incorporate apps including collaboration and contact centres.

Customers include BA, AEG, DHL, HP, the Irish Prison Service, Credit Suisse and the Bank of England.

The West Sussex-based business was founded in 2001 when Apax Partners acquired the direct sales operation from Ericsson for $480m (£316m), but it went through debt-for-equity restructuring in 2007 after running into financial woes, a move that saw the private equity player exit.

Major bondholders include Goldman Sachs and Och-Ziff, both of which agreed to exchange €358m of fixed-rate and floating-rate bonds for equity in Damovo.

Sources close to UK ops told us Damovo had been unloved by the bondholders for some time. One said it had been “starving it of cash every year, taking out costs and not reinvesting”.

Travel back to the fiscal ’04 ended 31 January, Damovo UK Ltd turned over just shy of £99m and banked an operating profit of £6.8m.

But fast-forward to the most recent full-year filing at Companies House for fiscal ’14, and the business made an operating loss of £3.58m on sales of £27.5m.

Damovo also has operations in Germany, Belgium, Switzerland and Poland, and an international arm that provides services to customers in circa 100 countries.

Our sources reckon operations outside of the UK will be sold to Oakley Capital, which is run by Peter Dubens, the former executive chairman at Daisy Group, who exited when it went private again.

Daisy Communications was founded by Matthew Riley in 2001. Riley has overseen 46 acquisitions to date. He is to become chairman when Muller starts in February.

Daisy Group refused to comment and Damovo did not respond to requests for comment. ®

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