Daisy Group has acquired the entire issued share capital of data network provider Managed Communications for a potential initial cash consideration of £6.3m (subject to adjustment (up or down) once Managed Communications' EBIT and cash position at completion and churn in the six months following completion has been determined).

Under the deal, £4.65m will be paid on completion with a further amount currently estimated at £1.66m to be paid after six months, subject to finalised completion accounts. In addition, an earn-out consideration is payable in 2011 based on the earnings before interest and tax performance of Managed Communications for the 12 month period from 1 August 2010 to 31 July 2011. All consideration payable will be satisfied in cash.

Based in Nottingham, Managed Communications provides data networks through bonded ADSL and SDSL lines to its base of approximately 800 SME customers. With search engine optimisation tools, the company sells internet access, VPN, managed security, email and managed bandwidth, along with VPN services.

As a lower cost alternative to leased lines, bonded DSL is a popular choice for smaller businesses, is a higher margin product and typically enjoys contracts of three to five years. The success of the offering to date gives the management team confidence that Managed Communications‘ products could answer the needs of the bottom 25% of the leased line market. In the year ended 31 December 2009, Managed Communications' unaudited management accounts show that the company generated adjusted revenue of £3.8m and EBITDA of £1.6m. Managed Communications is expected to have £1.1m of cash at completion.

Matthew Riley, Chief Executive Officer of Daisy, said: "Strategically this is the right acquisition for us as we move forward into a data rich and more converged world. The combination of Managed Communications and their product offering, with Daisy's sales force and SME customer base, creates cross-selling potential and the opportunity for margin improvement. Through this acquisition, we have strengthened our data offering, increased our range of services and will be able to provide our SME customers with more of what they want."