Daisy bets big on SME: snaps up XLN for £210 million

Daisy Group is to acquire rival XLN for over £200 million it has been announced, in a deal that will see the family of XLN founder Christian Nellemann pocket roughly £90 million.

Matthew Riley, Daisy Group Chairman

XLN, which was founded in 2002, specialises in supplying business broadband, phones and card payment services to the UK SME market. Its acquisition will more than double Daisy’s share of this market, with the addition of over 120,000 new SME customers. With over 200,000 SME customers and £200m+ in revenues, Daisy is on the verge of entering the premier league of SME providers.

Dave McGinn, CEO of Daisy Communications

Daisy Group chairman Matthew Riley said: “With so much investment across the UK to improve the fibre infrastructure, Daisy is now well-positioned to help unlock the enhanced speed, reliability and security that customers want in their offices and shops up and down the country”. Dave McGinn, CEO of Daisy Communications, explained that the quality of the acquisition was important to Daisy: “I’ve always admired XLN and its philosophy of championing small businesses; it’s a great organisation and shares the same passion for customer service as demonstrated by their Trustpilot score”.

Daisy has grow substantially by acquisition. Today’s company is the result of over 50 acquisitions since 2003. It can trace its origins back to the acquisition of Pipex by GX Networks in 2003, but it was only in 2009 when the then-named Freedom4 group bought Daisy (founded 2001) in a reverse takeover that the company was renamed Daisy Group. That year it floated on the LSE’s AIM market before delisting in 2015 and becoming a private company once again. Since delisting it has acquired Damovo, Phoenix IT Group, Alternative Networks, Voice Mobile and DV02, and Premier Choice Telecoms. The largest of these was Alternative Networks which it bought for £184 million. In 2019 the company separated into four businesses: Daisy Communications, Daisy Corporate Services, Aurora and Digital Wholesale Solutions. Cloud business DWS was later demerged and sold to PE firm Inflexion for £1 billion.

The XLN acquisition is expected to be completed in early March.

Omnisperience’s View

The UK SME market is still highly fragmented despite recent consolidation and so there’s considerable scope for CSPs to grow in this sector – firstly inorganically via acquisition and secondly due to the progressive digitalisation of SMEs.

To some extent the concept of an SME sector is itself misleading – while it has to be said that the number of employees is no longer a good indicator of ICT spend, as automation along with the increased use of contractors has changed the game, there are typically huge differences between what a 10-person business and a 250-person business need.

Daisy traditionally played in a different part of the SME sector to the likes of BT and Vodafone. Its sweet spot is the small business sector – typically businesses with 80-100 employees. With both BT and Vodafone now having their eyes firmly set on increasing their scale in the small business market, bulking up by consuming small operators and resellers is a very sensible tactic to pursue in order to gain the scale needed to compete. Readers should note, however, that Daisy itself has had a ‘for sale’ sign on it. For a reseller to be of interest to large operators and PE firms, Daisy needs to be the beefiest reseller in the market. This is another step in that direction.

Teresa Cottam
Teresa Cottam

No Comments

Write a Reply or Comment

Your email address will not be published. Required fields are marked *


Categories