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Microsoft seller Trustmarque seeks private equity sugar daddy

Appoints William Blair to run the process for £200m sales firm

Exclusive Trustmarque is erecting a for sale sign outside corporate HQ as the management team looks for a new private equity backer to fund a buy-out.

The volume licensing reseller-cum-managed services outfit is currently backed by Endless LLP, which swooped for the York-HQ’d business when it faced well publicised cash-flow challenges in 2014.

According to sources that have seen sight of a teaser document, investment bank William Blair - the same company that managed the $431m sale of Kelway to CDW - has been appointed to run the process.

An Information Memorandum is being distributed to prospective buyers as feelers are put into the market to test the interest among the investment community to get behind the near £200m sales firm.

A new backer will be the fourth at Trustmarque in three years; Dunedin financed a £43m MBO in 2013 to replace Lloyds Development Capital; but it sold the stake to Endless LLP a little over a year later in September 2014.

Management at Trustmarque had uncovered an accounting error related to revenue recognition which created a financial hole that Dunedin refused to fill.

Endless-owned Liberata, which had acquired Microsoft cloud and managed services outfit Trinity Expert Systems from administration in October ’13, picked up Trustmarque and subsequently merged both businesses under the Trustmarque banner.

In truth, the strategic fit between Liberata and Trustmarque was not apparent, and given the rebound in fortunes, Endless wants to try to cash in on its asset.

According to analyst Megabuyte, which this week spoke to management about financial results, Trustmarque revenues jumped nearly 10 per cent to £195m in 2015. Rounded up, this includes £145m from reselling, £33m from cloud and managed services and £18m from professional services. It made an EBITDA of £8m.

Some £80m of revenues were generated by sales to the UK government, making Trustmarque the biggest third party supplier of Microsoft to the local public sector.

Management has written a business plan to grow into a £500m sales organisation by 2020, growing organically to £300m and making up the rest via acquisition. Sources suggested five to six targets are already identified.

The sale of Trustmarque follows some high profile events in the mid-market channel last year, that saw Softcat float on the London Stock (market cap is now north of £600m) and CDW subsuming Kelway. ®

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