Friday 08 January 2016

Six Degrees steps up growth plan with Charlesbank backing

6dgThis week Six Degrees announced that its new owner, Charlesbank Capital Partners, would be contributing a further £12m to support the company’s organic growth plans. Charlesbank is a US private equity firm with offices in Boston and New York and more than $3bn in assets. The company bought Six Degrees from previous (and much smaller) backer, Penta Capital, in June 2015. At the time, we estimated the deal was worth in the order of £160m+ (based on average deal valcharlesbankuations of 2x revenue), delivering returns of 2.7x to the Penta team.

The new funds will be used to employ over 50 new people in the coming 3-4 years in roles such as sales (including pre-sales experts), marketing and customer services (technical/support roles). One of the objectives is to bulk out the number of experts who can put together and support the more complex technology solutions – the driver of both margin and differentiation. Six Degrees wants to do an increasing amount of work ‘up the stack’ – i.e. services supporting the delivery of customer applications. Importantly, this does not mean moving into application development. Six Degrees will partner with ISVs who do the ‘heavy lifting’ application development work, but will deepen its skills around hosting applications (e.g. running websites and production IT environments) or providing managed security and compliance services, for example. In the first instance, the company will develop more skills around the Microsoft stack – where it already does quite a bit of work. Over time it might consider partnerships with ISVs in the SAP and Oracle space.

As well as spending some of that £12m on new people, Six Degrees will also invest in the further development of its tools – which is essential for continuous improvement of customer experience. In particular, Six Degrees wants to do more transformative work with customers, and already has c30 people working in its programme and systems group on complex projects to “transform the customer experience in a digital world”.

All in all, we think Six Degrees is being realistic about where it should focus its investments and how long those investments will take to come to fruition.

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Posted by Kate Hanaghan at '09:08' - Tagged: cloud   funding   hosting   mid-market   convergence