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ECI Partners acquires majority stake in XLN Telecom

ECI Partners, a UK mid-market private equity firm, has invested in XLN Telecom alongside management, acquiring a majority stake from Zeus Private Equity. 

Lloyds TSB Corporate Markets Acquisition Finance jointly arranged a package of senior debt and a revolving credit facility.

XLN is a provider of telecoms services for small businesses, with over 115,000 customers.

In the last three years, XLN’s revenues have grown from GBP27m in 2006/07 to over GBP54m in 2009/10.

ECI will continue to support Christian Nellemann, founder and group chief executive, and his management team to grow XLN both organically and through acquisition. As a result of this transaction the company will have funds available to more than double the size of the business through acquisitions.

The deal has delivered a multiple of investment of 4.5x for Zeus, which originally backed the management buy-out of XLN in January 2008 with a GBP6.63m investment for a majority stake in the business. Zeus went on to support XLN’s acquisition of competitor OneBill Telecom, with an additional investment of GBP2m.

Tom Wrenn, who led the deal for ECI, says: “XLN is a superb growth business in a sector that has performed strongly during the recent downturn. It is led by a high-quality management team that has a clear vision for the future. XLN has considerable scope to add more products and services and is in an excellent position to act as a platform for consolidation in the fragmented telecoms market. We are delighted to be backing this excellent team and to provide additional capital to continue to grow the business.”

Nellemann adds: “By taking a completely fresh approach, we have been able to transform a niche and historically overlooked sector of the market. We have been able to achieve this by combining best quality products with best value pricing and industry leading customer service standards. As a result, we now have a highly profitable and scalable business that will allow us to rapidly expand the range of services we deliver to the small business market. We are delighted that ECI will be a key part of the business’s exciting next chapter given the opportunities for consolidation within our sector.”

Jeremy Perl, director at Lloyds TSB Corporate Markets Acquisition Finance, says: “The key competitive advantage of XLN is its proprietary, automated technology platform, which enables it to offer attractive prices and excellent customer service. This, when combined with its established routes to market, means the company is continually gaining market share, with scope to further increase its penetration. The transaction represented an excellent opportunity for us to support the first deal out of ECI Partners’ latest GBP437m fund and demonstrates our commitment to funding growing, forward looking, technology-based businesses.”

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