Daisy’s Matthew Riley still hungry for acquisitions

Telecoms industry still ripe for consolidation following Daisy’s £200m AIM deal, Riley says

The chief executive of the newly formed Daisy Group, Matthew Riley, says there are “big opportunities” for consolidation after he announced a £200m flotation on AIM last week.

Daisy is reversing into AIM-listed Freedom4 Group, a telecoms firm previously known as Pipex, with Vialtus, Pipex’s former business telecoms arm, also becoming part of the business, which has been renamed Daisy Group.

The new group is raising £83m through a placing at 4p a share, and will have a market capitalisation of £200m at placing price.

It will have £50m available for acquisitions and combined revenues of £100m.

Freedom4 is paying £81m in a mixture of cash and new shares for Daisy, giving Riley, the firm’s founder, a £30m cash windfall and £51m in shares.

Riley, who has completed 23 deals since establishing the firm in 2001, told Growing Business: “We do see big opportunities for continuing to consolidate within the SME space but it will be a very focused consolidation, so not just running out and buying anything. It will be picking the right assets at the right price.”

He confirmed larger rival Chess could be a potential target. “It depends on when David [Pollock, Chess founder] decides on what he wants to do,” he said.

The purchase of Vialtus as part of the deal will broaden Daisy’s product base, Riley confirmed. “It will allow us to have that true convergence skill set and be able to offer our customers products such as hosting, virtualisation, cloud computing, all the growth parts of the industry that we thought were really necessary to help us take a grip of the SME marketplace.”

Riley won the Bank of Scotland Entrepreneur Challenge in 2007 and says the mentoring he received from retail magnate Sir Philip Green as part of his prize has proved invaluable in putting his most recent deal together.

“He certainly really helped me on the whole process, and on deciding whether we should do a flotation or a trade sale,” he said.

“We looked at all the different options and he held my hand and walked me down the path towards the right decision, which was very useful. That sort of advice is something money can’t buy.”

Despite the depressed state of the AIM market giving Riley “reservations” about the deal initially, he said the flexibility it gives to make acquisitions made it “the right market to go into”.

“If we get to a stage where we slow down with acquisitions perhaps we may even look to move up to the main market.”

He also said he’s confident for a good aftermarket for the company’s shares and that the firm “got a resounding yes” from institutional investors. “The take up of the stock was very good.”

Riley is preparing for life as a public company CEO by looking to strengthen his senior management team by bringing in a COO.

“The biggest thing for me is to run the business, that’s what I need to keep focused on, while updating the City with the help of the chairman [Pipex boss Peter Dubens] and non-execs. I should slowly ease my way into the public side of the role,” he said.

Despite the £30m cash windfall, Riley said he has no immediate personal plans for the money.

“I’m going to put it somewhere as safe as possible,” he said.

“That’s not the exiting part. I’ve still got a huge chunk of a business that I can see being a real serious threat to BT in the mid-market. It’s nose to the grindstone and keep going really,” he added.

© Crimson Business Ltd. 2009

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