Gamma adds UCaaS muscle with £165m acquisition in Germany

• UK-based Gamma Communications agrees £165m cash deal to acquire Starface, a cloud PBX specialist in Germany, primarily serving SMEs
• Once the deal is approved, which is expected to happened within two months, Gamma will more than double its number of cloud PBX seats in the country to over 500,000
• Starface acquisition is part of Gamma’s strategy to become the top UCaaS (unified communications-as-a-service) provider in western Europe

UK-based Gamma Communications, a provider of cloud-based communications for enterprises, has announced a €165m cash deal to fully acquire Starface, which offers proprietary business communication and collaboration software solutions to small to medium businesses (SMEs) in Germany. Starface also has a nationwide distribution network of more than 2,000 channel partners, which Gamma is eager to tap into to extend its SME reach in what it regards as a key market.   

Gamma is on a mission to become the number one UCaaS (unified communications-as-a-service) provider in western Europe and said the move delivers on its strategy “to establish a new anchor in the European business, alongside our well-established UK business”.

Combined with its recent acquisition of Placetel, which provides Cisco UCaaS and collaboration solutions primarily to small-office, home-office (SOHO) and SME businesses across Germany, Gamma boasted that the addition of Starface will make it “a market leader” in the German SME cloud communications market.

Starface brings to the Gamma table an additional 210,000 cloud PBX seats in Germany, which brings its total there to over 500,000 sold seats (around half the number it has in the more developed UK market). The acquisition, noted Gamma, will also complement its SIP (session initiation protocol) business in Germany. Starface has a focus on transitioning on-premise SIP PBX users onto cloud solutions, and has a hardware SIP PBX base of approximately 360,000 seats.

Gamma CEO Andrew Belshaw, in prepared remarks, lauded the strategic value of the Starface deal. “This acquisition marks a significant milestone for Gamma as we further strengthen our position in Europe’s cloud communications market,” he said. “By combining Starface’s strong partner ecosystem and technical expertise with Gamma’s established connectivity capabilities, we’re delivering unmatched value to our customers and partners.”  

Gamma is stumping up £125m in cash from its own resources to fund the deal, with the remaining £40m slated to come from a new £130m multicurrency revolving credit facility. Gamma said the undrawn portion of the facility will be “available for further uses in line with Gamma’s balanced approach to capital allocation”. The debt facility will have a three-year term, with an option to extend for an additional 12 months.

Gamma expects the Starface transaction, subject to the usual regulatory clearances, to be given the go-ahead within two months.

Gamma is a profitable company that has been consistently growing its revenues. For the first six months of 2024, the company reported sales of £282.5m, up 10% year on year, and profit before tax of £48.5m, up 11%. It issued a trading update today (Tuesday) that noted the company expects to report healthy growth for the full year 2024 “driven by organic growth and supported by acquisitions”. 

Its stock trades on London’s Alternative Investment Market (AIM), where its share price currently stands at 1,400 pence – 26% higher than a year ago – giving it a market valuation of almost £1.35bn. The company plans to move its listing to the main London Stock Exchange during the second quarter of this year. 

- Ken Wieland, Contributing Editor, TelecomTV