GCI to come to market with KPMG mandated – sources

UK-based managed IT services firm GCI is being prepared for a sale by shareholders Business Growth Fund (BGF) and GCI founder and Chairman Wayne Martin, said two sources briefed on the situation and a sector banker.

KPMG has been mandated to handle the sale process, which is likely to kick off in the second half of this year or the beginning of next year, said the sources and the banker.

The company was generating approximately GBP 12m EBITDA run rate in January on GBP 70m revenue run rate, following the acquisition of Freedom Communications, one of the sources said. Terms for that transaction were not mentioned.

Martin, who owns a majority stake in the company, may look to keep a minority stake in GCI, said the other source.

GCI’s EBITDA run rate is expected to be between GBP 15m and GBP 20m when the process is launched, as the company may make fresh bolt-on buys in the near term, both sources said.

Potential bidders include most UK midmarket private equity firms, the first source said. Charlesbank, which owns UK-based data and telecoms firm Six Degrees, may be interested, both sources said. Toscafund and Penta Capital, which together took telecom provider Daisy Group private in 2014 for GBP 608m, could be interested as well, they said.

UK-based ICT provider Chess may be interested as well, the banker said. However, GCI may be too large for Chess, which acquired UK cybersecurity firm Foursys in April, a deal that brought Chess’ revenue to GBP 120m, the first source said. San Jose, California-based cloud communications firm 8×8 [NASDAQ:EGHT] may take a look, but its product offering may be an awkward fit with GCI’s, both sources said.

GCI has made four acquisitions since BGF invested GBP 10m for an unspecified minority stake in the company in 2012, according to Mergermarket data.

BGF and GCI did not respond to requests for comment. A spokesperson for KPMG declined to comment.

by Amy-Jo Crowley and Yining Su in London