Sangoma Technologies Corp has acquired NetFortris Corp, a Plano, Texas-based unified communications-as-a-service and managed IT network solutions provider. The deal’s upfront consideration was $68 million. NetFortis was backed by Spire Capital. Based in Markham, Ontario, Sangoma is a provider of cloud-based communications-as-a-service solutions.
MARKHAM, Ontario, March 29, 2022 (GLOBE NEWSWIRE) — Sangoma Technologies Corporation (TSX: STC; Nasdaq: SANG) (“Sangoma” or the “Company”), a trusted leader in delivering cloud-based Communications as a Service solutions for companies of all sizes, today announced it has acquired NetFortris Corporation (“NetFortris”). This acquisition further accelerates Sangoma into the upper echelon of SaaS communications providers and extends our industry leading suite of cloud services with new MSP capabilities, thereby delivering even more ‘one stop shopping’ for our customers and providing larger ‘share of wallet’ for Sangoma.
NetFortris provides UCaaS and cloud-based, fully managed MSP (managed service provider) solutions for businesses of all sizes and across all industries. They have approximately 250 employees and four primary offices in Dallas, Seattle, Los Angeles, and Manila. In addition to NetFortris’ UCaaS offering, their MSP product line delivers all the mission critical communications services that customers need to complement their ‘as a Service’ applications, such as managed network security, managed SD-WAN, managed network access, monitoring, etc.
These MSP services are built upon a highly integrated, end-to-end managed network, backed up by an expert 24/7 network engineering team. NetFortris has over 6,000 customers in North America, over 60,000 seats, with very low customer concentration, and generates expected annualized revenue of just over USD $50 million.
Pursuant to the definitive stock purchase agreement dated March 28, 2022, Sangoma has acquired NetFortris for USD $68 million in upfront, fixed consideration (the “Upfront Consideration”) and up to USD $12 million in an ‘Earn-out’ (the “Contingent Consideration”), for total consideration of up to USD $80 million if the Contingent Consideration is fully earned. The transaction is now closed.
“A critical part of our existing strategy, and of our competitive differentiation, involves providing customers with the widest set of cloud communications services in our industry, avoiding the need for them to buy five different services from five different vendors,” said Bill Wignall, President and CEO of Sangoma. “The acquisition of NetFortris further extends that strategy in such a perfectly natural manner. Not only can customers already get from Sangoma all the ‘aaS’ products they use today, but now they will also be able to obtain all the other cloud-based MSP services they know they need, such as managed network security, managed access, and managed SD-WAN. This truly is ‘one stop shopping’ for our customers, and it taps into that very important new trend that so many of us in the industry see starting to emerge. I am most excited about this acquisition, our eleventh in eleven years, because it demonstrates our innovative, unique, forward-looking vision and it continues to push Sangoma ahead in the market, further differentiating us from the competition.”
Strategic and Financial Rationale
There is growing awareness that customers will prefer to get more and more of their communications services from one vendor. Not only over-the-top “aaS” cloud communication apps (UCaaS, CCaaS, TaaS, VMaaS, CPaaS, Collaboration, etc.), but also the network security/connectivity/redundancy/monitoring/etc. they know they need: not only does this transaction satisfy that growing trend, but it does so in a way which is a perfectly natural fit with our existing strategy of offering ‘one stop shopping’, by simply extending our industry leading suite of ‘aaS’ products, with this new set of complementary MSP services.
See what a leading industry analyst has to say about this trend:
“Our research continues to show that customers want one vendor to go to for their cloud communications and collaboration requirements, and many organizations also prefer to purchase additional services – e.g., cybersecurity, broadband, etc. – from their UCaaS providers. With the addition of NetFortris, Sangoma’s approach will resonate extremely well with customers of all sizes,” said Elka Popova, VP of Connected Work Research, at Frost & Sullivan.
In addition to our end customers, some of Sangoma’s existing channel partners are also in the MSP business already, and this will give us the opportunity to meet more of their need for such products and services as well.
Very Strong Recurring Revenue: NetFortris generates over 90% of its revenue in MRR, which will bring Sangoma closer to 75% (pro-forma) of our revenue in Services.