Iomart Group has agreed to acquire the entire issued share capital of Extrinsica Global for £4m.
Extrinsica is a Microsoft Azure Cloud solution services provider, which aligns with iomart’s secure hybrid cloud strategy.
The Oxford-based firm was incorporated in 2010 as a cloud services provider to micro businesses. In 2017, its current business model was established, when it was invited by Microsoft to become one of the first 25 Microsoft Azure partners worldwide.
The deal should provide iomart with more Microsoft Azure expertise, via a team of 33 based in the UK.
Simon Smith, chief executive and co-founder of Extrinsica, will continue to lead the business, while from a legal, financial and governance perspective, it will become part of iomart.
For the year ended 31 March 2023, Extrinsica generated revenues of £7.4m, being year-on-year growth of circa 40%.
The initial consideration of £4m has a potential further £300,000 in cash, payable on the achievement of certain key customer targets during the calendar year.
Of the initial consideration, £2m will be satisfied by the issue of 1.56 million new ordinary shares in iomart, which under the terms of the sale and purchase agreement are subject to a 12 month lock in provision and based on a fixed share price of £1.28. The balance of £2m will be paid in cash.
Iomart will also repay £3.7m of debt acquired on completion.
The deal also includes a further £4m to £7m of contingent earn-out payments, which are calculated based on Extrinsica’s profitability for the 12 months ending 31 March 2024.
The initial consideration, debt settlement and any earn out consideration will be financed through a combination of existing bank facilities and cash on the company's balance sheet.
Reece Donovan, chief executive of iomart, commented: "Simon and the team have been at the forefront of the market developments of Azure since 2017 and have deep skills and expertise in this in-demand area of cloud computing, which will accelerate the initial investments we have made in our own Microsoft resources and capabilities.
"This is a meaningful step in our strategy, as we position the group for its next phase of growth as a leading secure hybrid cloud business."
Smith said: "Joining iomart marks an exciting phase for our highly skilled, experienced and ambitious team, providing us with a strengthened platform for growth.
"Iomart has a long pedigree in cloud infrastructure, an impressive customer base and a growth strategy which I believe positions iomart well for future success."
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