Blackstone is to become a majority shareholder in Cloudreach, the cloud software and migration company headquartered in the UK. Terms have not been disclosed.
Cloudreach uses the tag line “Not if. When.”, which we think applies nicely to its position as an acquisition target. We have no doubt the company has been approached many times by interested trade buyers, but our sense is that CEO Pontus Noren was not about to sell out to another player.
With the Blackstone backing, Cloudreach intends to accelerate its growth. Indeed, the company acknowledges that “to play a significant role in this next stage of market maturity requires significant financial resources”.
In FY15 (the latest set of publicly available data), revenue exploded from £8.4m in the previous year to £24.5m. This came on the back of an investment made by a “third party” in May 2014 ($3.5m of convertible loans). It’s not clear who that investor was, but the injection of cash looks to have been critical.
Cloudreach’s competitive landscape is interesting. There are of course the large SIs that partner with AWS, Azure and Google, but also various other smaller players. Indeed, KCOM is often mentioned in the same breath as Cloudreach as the ‘front runners’ of AWS migration in the UK. But even these two combined have revenue that we estimate is way under £50m - a drop in the ocean in the grand scheme of IT spend in the UK. There is not only a lack of acquisition targets with significant revenue in the UK, but also a lack of professionals with the appropriate cloud/digital skills. Indeed, this is something AWS has looked to address via its re:Start programme, see: AWS re:Start programme: A force for good for UK digital skills?
Read more analysis on the Cloudreach acquisition, here: Cloudreach acquisition reflects important market changes.
Posted by Kate Hanaghan at '09:56'
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