British IT managed services provider Redcentric has announced its acquisition of three data centres from Sungard Availability Services (Sungard), as well as the separate acquisition of the entire share capital of 4D Data Centres Ltd (4D).
In a press release statement, Redcentric affirmed that the acquisitions were aligned with the company’s business strategy to enhance its capability and scale through mergers and acquisitions (M&A).
Redcentric noted that Sungard’s data centre business and IT recovery services, which host and manage mission critical infrastructure for a blue-chip customer base, would be an “excellent addition” to Redcentric’s existing client base. 4D provides colocation hosting services through two data centre centres in the UK.
Within the press release, Redcentric affirmed that the acquisitions of Sungard and 4D would provide “significant cross-sell opportunities” and expand the company’s product and solutions portfolio.
Enhancing Redcentric’s Hyperscale Capacity
Sungard had previously filed for bankruptcy in April 2022, following a sharp decline in user demand for its services. Sungard was operating on a loss because it had continued to focus on providing temporary office spaces and continuing office work at colocation facilities instead of transitioning to cloud services, as many other companies had done.
Nonetheless, Redcentric said that while the Sungard data centres business was loss-making, Redcentric remained confident that it could turn the data centres into a profitable position within six months of ownership, and expected to achieve long-term EBITDA margins from this acquisition of 25% by the end of the year ended 31 March 2024.
One key strategy Redcentric would be adopting to turn Sungard’s data centres into a profitable business would be to manage high electricity prices (which raise production costs and lower profits) by implementing energy efficiency measures which Redcentric estimates will cost up to £1.5m in one off capital expenditure.
Currently, Redcentric will occupy Sungard’s three data centres under license. The company expects to conclude negotiations to take on finance lease liabilities shortly, with a weighted average lease life of 6.4 years.
Redcentric acquired the entire issued share capital of 4D on 27 June 2022 through a consideration of cash and debt like items valued at £10.0m.
CEO of Redcentric Peter Brotherton expressed his optimism for the acquisition’s potential to enhance Redcentric’s business capabilities, saying that “with these 2 acquisitions, we have now completed 5 acquisitions in the last 9 months and totally transformed the Company. We have added over 600 customers to our base and increased run rate revenues by circa 60%.”
Speaking on earlier acquisitions made by Redcentric, Brotherton added that “the acquisition of Piksel has broadened our product offerings by adding full hyper-scale capability; the 7 Elements and Sungard consultancy acquisitions have significantly strengthened our security product portfolio; and the Sungard DCs acquisition has added new recovery-based services. We believe that we now have the most comprehensive IT and Telecommunications product and solutions offering in the market.”
He concluded by noting that “during the next 6 to 9 months our focus will switch to fully integrating the acquired businesses and exploiting the meaningful cross-sell opportunities that these acquisitions bring to Redcentric. We look forward to making the most of the very significant opportunities that come with these acquisitions and to an exciting future.”
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