SECTOR FOCUS: IT SERVICESAhead inthe cloud<strong>Livingstone</strong> recently hosted its latest in a series of industryround-table lunches focused on the IT services sector, atwhich leading industry figures gathered to discuss trends inthe market and the optimal ways to build and capture value.Two recent deals – the MBO of AVM and the sale of Worldstone– illustrate some of the topics discussed at these eventsIn the private room of The Delaunay restaurant in London,a group of seasoned entrepreneurs, senior executivesfrom multinational groups and investors gathered with<strong>Livingstone</strong>’s Tech team to discuss the latest trends in theIT services industry.The themes they discussed are highlighted by two recenttransactions on which <strong>Livingstone</strong> advised; the sale of AVM,backed by Octopus Private Equity, to a secondary buy-out backedby Alcuin Capital, and the sale of privately-owned Worldstoneto Jersey Telecom (JT).REMOTE POSSIBILITIESThere was consensus around the discussion table that cloudbasedservice provision is, and will remain, a major driver ofgrowth, opening up new opportunities as more services can behosted and managed remotely.AVM’s nascent cloud offering was a good example, allowingremote management of AV infrastructure for clients with globalactivities, enabling them to replace big-ticket capital expenditurewith modest ongoing operating costs. At the time of the deal, itwas a small part of AVM’s overall business, and therefore not theprimary value driver. However, it was seen to offer excitingstrategic upside, increasing overall interest in the opportunity.But AVM was a buy-out; if the transaction had been a strategicsale, value might have been captured through an earn-out linked tofuture cloud revenues. For some owners and buyers, earn-outs canwork to deliver extra value or bridge a gap. In other transactions,they can be an impediment to integrating the two companiesquickly. In the case of Worldstone, as they completed their diligenceon the company, JT became increasingly comfortable with thesolidity of the business and excited about the potential synergiesintegration would unlock. <strong>Livingstone</strong> eventually agreed a‘clean’ deal for the owners, rather than linking value to acontingent earn-out.SHOW ME THE SYNERGYThis highlights the importance of synergy potential in aconsolidating market like IT services and this was key to JT’sinterest in Worldstone. Simon Cope-Thompson, Partner at<strong>Livingstone</strong> London, who led the transaction, explains: “We couldsee a range of synergies, which would benefit the customers ofboth companies, and had the potential to drive increasedrevenues as well.”Deals in the spotlightAVM is the UK’s leading provider of visual communicationssolutions and operates at the forefront of the unifiedcommunications market. Established in 1990, it providesvideo conferencing and AV services, including supportingcomplex IP-based video networks,and managing andmaintaining telepresence suites.Worldstone is a managed services provider specialising invoice, data, networking, contact centre and collaborationsolutions. Founded in 1995 by CEO Suresh Punjabi,Worldstone works with an expanding global customerbase from its offices in the City of London.10 // WWW.LIVINGSTONEPARTNERS.COM // SPRING <strong>2013</strong>
Contact:Simon Cope-Thompson, Partner, <strong>Livingstone</strong> LondonT: +44 (0)20 7484 4706, E: sct@livingstonepartners.co.ukTom Phipps, Director, <strong>Livingstone</strong> LondonT: +44 (0)20 7484 4717, E: phipps@livingstonepartners.co.ukWWW.LIVINGSTONEPARTNERS.COM // SPRING <strong>2013</strong> // 11
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