Cloud services provider Fusion has acquired Fidelity Voice and Data, a Beachwood, Ohio-based provider of cloud voice, cloud connectivity, security, data center and cloud storage services to approximately 2,000 small, medium, and large business customers in the Midwest and throughout the U.S. Fusion expects to complete the integration of Fidelity by the end of the second quarter of 2016.
Total consideration in the transaction, which closed on December 8, 2015, was $30 million consisting of $28.5 million in cash and $1.5 million in Fusion common stock. The cash portion of the consideration was funded via Fusion’s existing bank credit facility and its cash balances. The transaction is immediately accretive to Fusion, with substantial opportunity for cost savings through elimination of redundancies. The purchase price represents a valuation of 5x pro forma adjusted EBITDA.
The Fidelity acquisition contributes tp Fusion a revenue base of approximately $18 million per year, over 90% of which consists of monthly recurring revenues (MRR), growing nearly 10% organically through the first nine months of 2015. It adds approximately $6 million in annual pro forma adjusted EBITDA after giving effect to projected cost synergies and brings a customer base of approximately 2,000 businesses with a high average monthly revenue per customer (ARPU) of approximately $750 and a low churn rate of approximately 0.5% per month.
Also, on December 7, 2015, Fusion completed an offering of common shares totaling approximately $6 million via its shelf registration statement, priced at the market close on December 4, 2015. The offering included significant additional commitments from Fusion’s largest institutional shareholder and from its chairman, its chief executive officer and other members of its board of directors.
“The acquisition of Fidelity brings Fusion closer to its goal of building significant scale in the fragmented but rapidly growing cloud services market,” said Matthew Rosen, Fusion’s Chief Executive Officer. “Fidelity will also contribute to Fusion’s organic growth, accelerating Fusion’s progress over the last year in expanding its business. We intend to drive additional organic growth by cross-selling and up-selling Fusion’s comprehensive suite of integrated cloud solutions and leveraging the benefits of Fusion’s nation-wide network to Fidelity’s current customer base.
“Fusion adheres to a disciplined acquisition strategy based on a strict set of criteria. Fidelity met each of these criteria, including a business customer base with predictable, contracted recurring revenues, a high ARPU, and low churn, as well as a team of professionals and network assets that can be tightly integrated,” Rosen continued. “We expect to quickly integrate the Fidelity sales and marketing team, its network and back office infrastructure to accelerate the introduction of Fusion’s advanced, proprietary cloud solutions and national footprint to Fidelity’s customers.”
“Fidelity’s strong business profile means that the acquisition is immediately accretive to Fusion,” said Don Hutchins, Fusion’s President and Chief Operating Officer. “We have also identified a range of specific cost savings opportunities which we expect to achieve as we integrate Fidelity into Fusion’s platform, just as we have accomplished with Fusion’s four previous acquisitions.”
