Sangoma acquired Netfortris for up to $80 million. Netfortris is a combo if Telekenex, Fonality and I think an MSP. They are a UCaaS and SD-WAN shop with $50 million in revenue. They have been on a hiring spree for the last year as I watched some friends at TPX move over there.
This is 60K seats and $50 million in revenue to go with the acquisitions of FreePBX, VoIP Supply, E4, VoIP Innovations, Digium (Asterisk) and Star2Star.
In UCaaS, hitting $100 Million in revenue is HUGE. (Read HERE). Under $100 Million has a lower valuation. Intermedia, Weave and Dialpad are all close to or at $100M.
Compare that to 8×8 acquiring Fuze in December of 2021. “The deal will be made up of $130m in cash and $120m in 8×8 stock. 8×8 said it will use up to $130.2m to pay off Fuze’s debt and other Fuze investors. Fuze has around 300 enterprise customers, culminating in over 400,000 paid users.” Approximately $130 million in revenue. That was a good deal: $130M in enterprise users for $250M = 1.9x revenue.
At $68M for $50M in revenue is a GREAT deal — and even at $80M it is a very good deal at 1.6x revenue!!
This leads me to think that there are a lot of fire sales in the UCaaS space. Why? People have been at it a long time. Most started in 2007-ish and have been at it for more than 10 years without really getting a handle on it – like say Zoom or RingCentral.
It is hard to get a handle on it. You need Branding and Innovation and a Value Prop. Service Delivery, LNP, E-911, and now SMS with A2P 10DLC combines to be a lot to deal with for customer satisfaction. Now UCaaS is getting pushed around by CPaaS and CCaaS. Owners and investors are probably very tired right now. They got a bump during the pandemic but not enough of one. And just when UCaaS might hit mainstream, customers start asking for other functions (hence, the CPaaS and CCaaS functionalities bumping into UCaaS).
Providers aren’t really training users, so they are losing the stickiness that comes with User Adoption and Power Users.
Microsoft Teams is tough to contend with because who wants to just sell dial-tone? Then try to work with the Global Admin and other issues like licensing and call routing.
Overall, it is getting complicated out there. It was supposed to get easier. There was supposed to be an exit strategy that involved beaches and fishing.
Another M&A transaction: Poly and HP. HP paid $1.7 Billion for Poly. In 2018, Plantronics paid $2B for Polycom and later re-branded as Poly. This week HP acquired the combined company for $3.3B including debt. It is $1.7B plus debt.
P.S.
And yet one more!! Lingo Management acquires all the stock of Bullseye Telecom. Bullseye is a predominantly copper selling CLEC. Lingo Management is Vincent Oddo, who was CEO of Birch Telecom. Birch Telecom was acquired/merged with Fusion (resulting in Fusion going bankrupt like Birch has done a number of times). Lingo was what Fusion didn’t want – like single line small business and consumer VoIP. The release says, “The BullsEye transaction is the latest in a long history of acquisitions that Lingo, or its predecessor companies, have announced in recent years.” Lots of M&A; very little good results from all that M&A. I am certain their will be the synergistic RIFs in the third quarter.