Ailing Calyx Managed Services flogged to MXC Capital for £9m

Troubled MSP expected to be broken up and sold on again


Private equity fund Better Capital has offloaded troubled Calyx Managed Services to tech investment and advisory house MXC Capital for £9m in what signifies a likely break-up of the biz.

VC veteran Jon Moulton’s Calyx MS came on the market before Christmas, with corporate financier Rickitt Mitchell & Partners distributing an Information Memorandum to a little over 10 firms.

This morning, AIM-listed MXC confirmed it had forked out the cash for Calyx MS, ending Moulton’s involvement with a company he'd first invested in when he was MD at Alchemy Partners.

“Calyx is a well established business delivering a broad portfolio of ICT solutions to an impressive roster of customers. We know the Calyx business well and it operates in market we are already active in,” said Marc Young, CEO at MXC, in a stock market filing.

For its part, Better Capital said Calyx was "sub scale" when compared to rivals in the sector and it was "not felt appropriate" to apply for further capital to make acquisitions to boost critical mass.

"As a result a decision was made to pursue a disposal of CMS, and in conjunction to plan a restructure of the business should any offers received not meet expectations."

Calyx MS is indeed known to MXC – managing partners Ian Smith and Tony Weaver sold the integration division of Matrix Communications to Calyx in 2006 for £40.5m.

The pair are buy-and-build veterans, who in the last half a decade alone were behind multiple acquisitions – including those of Redstone, Maxima and Netservices.

These businesses were broken up (parts were usually sold off, sometimes closed) and the remaining core used as the basis to stage a rollup in the fragmented managed services mid-market (ie, Redcentric Plc, Accumuli Plc).

Expect more of the same.

Manchester-headquartered Calyx can be boiled down into three basic operations: managed services, break fix and WAN reselling. It employs around 200 staff. It has a satellite sales office in London and a service repairs centre in Hyde.

The business was founded by Maurice Healy in 2002 as a spin-off from Alphyra, an electronics payment group in Dublin.

Moulton’s first involvement with the company was in 2007, when Alchemy backed an MBO involving Healy, paying €12m for a 59.2 per cent stake as Calyx delisted from AIM. This valued the business at more than €103m.

A little over a year later, Healy, with the backing of Anglo Irish, took out Alchemy’s majority shareholding for €500,000 in cash.

But Moulton was out of Alchemy and had created Better Capital when Calyx Networks hit the skids in 2010 – due in part to a crushing debt burden: he came in for the business, buying the debts of circa £100m for considerably less – some £17m.

But despite some management changes, splitting the business in two (Calyx MS and software firm M-hance), and making further acquisitions, results remained on a downward trajectory; in calendar 2011 the firm turned over £31.8m and made a total operating loss of £5.32m after exceptional items. Net loss was £7.54m after interest charges.

In calendar ’12, sales slipped to £29.16m and the total operating loss after a series of one-off charges was £4.97m. Interest charges took net losses to £7.4m.

In the most recent filing at Companies House for 2013, revenues had slipped to £23.9m and it reported an operating loss of £4.25m, but after interest the retained loss for the year was £7.3m.

It appears Moulton’s latest involvement with Calyx was not his most successful, and comes on the back of the administration of City Link and closure of Reader’s Digest.

We have asked Moulton for comment and will update the article if he provides one. Updated

Moutlon refused to make further comments. ®


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