ECI makes first investment from Fund IX

The £80m acquisition of Manchester-based XLN will net the vendor, Zeus Private Equity, a return of 4.5x its original investment.

ECI Capital Partners has acquired a majority stake in Manchester-based telecoms provider XLN telecoms in a secondary buyout from Zeus Private Equity. Financial details were not disclosed, but a source with knowledge of the situation put the enterprise value of the deal at around £80 million (€93 million; $126 million).

The deal marks the first investment from ECI’s ninth fund, which closed in December 2008 on £437 million. It is also the second exit from Zeus’ maiden fund and will generate the regional player a 4.5x multiple on its original investment.

Zeus took a controlling stake XLN in January 2008 in a £6.63 million management buyout deal, only the second transaction from its then recently closed £100.6 million first fund. Under Zeus’ ownership, XLN’s customer-base grew from around 72,000 to 117,000 in less than three years, and made one acquisition, rival telecoms provider OneBill Telecom. 

Towards the end of 2009, Zeus received unsolicited approaches for XLN from both trade and private equity buyers, partner Tony Dicken told PEO. A formal process was arranged in April 2010 and a first round of bids was completed. When it became clear that XLN’s management team were keen on another private equity owner, Zeus ran a second round with just private equity bidders, and eventually granted exclusivity to ECI.

Explaining ECI’s rationale for the purchase, partner Charlie Johnstone noted many opportunities for acquisitions within the fragmented UK telecoms market. “Without doubt there a number of smaller telecoms businesses servicing similar markets in the small business community,” he said.  “We think there is an opportunity to buy those businesses.”