In July, Redsquid announced two new acquisitions and a committed funding line to support further M&A activity. James Goulding finds out more about the company’s ambitious buy and build strategy from CEO Sohin Raithatha.
Redsquid, the Technology Reseller MSP of the Year in the Mid-Enterprise category (£5 million to £10 million turnover), could soon be challenging for honours in the next level up after completing two transactions that have the potential to take its turnover to more than £10 million.
The acquisitions of Covue, an MSP with a strong footing in the education sector, and telecoms provider Connect2, the company’s fourth and fifth M&A transactions since 2019, reinforce Redsquid’s position as a fast-growing provider of IoT, cyber security, IT, data connectivity & voice.
They also give an extra boost to the transformation journey the company has been on since 2019.
Redsquid was set up by CEO Sohin Raithatha and COO Vince Mignacca 17 years ago in the latter’s spare bedroom. It started out selling mobile voice and data services to SMEs, and within three years had achieved a turnover of £1 million. Over the next decade it continued to grow and expand its offering, moving into fixed line telephony and unified communications with the acquisition of 5Com in 2015. By 2016, it had 40 employees and 550 customers.
Even so, profits were low and margins depreciating. Raithatha realised that in order to increase profitability and retain the loyalty of customers with increasingly complex requirements, Redsquid would have to embrace new technologies and services and start providing customers with IT managed services as well as voice. “In 2019, we still had a very traditional base of telecoms and a big base of mobility. Margins were quite tight, and we were turning over around £3.5 million with an EBITDA of about 80K,” he explained.
“Since then, we’ve gone on to upskill our existing talent, recruit extensively and expand our portfolio, acquiring Ridgeway Telecoms, Triumph Technologies (a £1.5 million revenue MSP based in Oxfordshire) and now Covue and Connect2. Today, we are a managed services provider offering all essential cloud-based technologies, including our recently launched Cyber/Kill Managed Endpoint Detection and Recovery solution backed by a SOC team of 30-plus security professionals, which we developed in-house.”
Redsquid increased turnover to just under £6.2 million in 2022 and Raithatha expects the company’s new acquisitions, combined with ongoing organic growth, to power a further 50% increase in revenue.
“We’ve only just completed on those acquisitions. But after a full year of trading I’d be disappointed if we weren’t close to £10 million, with an EBITDA approaching £2 million,” he said.
Raithatha adds the caveat that it’s hard to predict turnover precisely because, through its diversified product offering, Redsquid has so many opportunities to engage with customers in a more in-depth, consultative fashion – including cross- selling to the customer base of newly acquired businesses.
“On the IT side, IT applications, cloud and security are all growth areas. We still have customers with legacy hardware, so that’s a great opportunity. On top of that, AI technology has massive growth potential and educating customers on how they can utilise AI with some of their products will be important. We are expecting Microsoft Copilot to be enormous.
“Even on the traditional comms side there are opportunities, from the full-fibre rollout, which could be transformational for businesses that have been used to slow data, to the PSTN switch off and the scope it gives us to modernise voice for customers with traditional PBXs.
“I read a statistic that in a few years’ time 28% of the market will be running their voice over Teams. That’s giving us the opportunity to have discussions with customers about using that one application for their internal and external comms instead of three or four, which then leads into conversations about their Microsoft licensing and their cloud and business continuity strategies. Security is another potential transformation journey.
“Our business has evolved massively in terms of our capabilities. Before we had mobile voice and data, but now we have got into the application side and IT managed security services there are so many opportunities to generate more revenue and better margins, from traditional cloud migrations to security strategy to SOC and SIEM.”
Buy and build
While Redsquid has devoted time and resources to upskilling its employees, Raithatha says the company’s transformation would not have been possible without the addition of new capabilities, accreditations and customers through its acquisitions.
“Deciding you are going to diversify and go to Kaseya or work with Bitdefender or Sophos is one thing, but to do that organically is nearly impossible, so we acquired Ridgeway in 2019 and Triumph in 2021. We financed the Ridgeway acquisition with some high-cost borrowing and then used the Santander Growth Fund to support our acquisition of Triumph and to refinance the Ridgeway acquisition.”
Funding for Redsquid’s most recent acquisitions, Covue and Connect2, was arranged through Triple Point and includes a committed funding line for future acquisitions that will enable Redsquid to complete transactions more quickly.
Raithatha is planning to acquire at least one more company in the next six months and make further acquisitions thereafter as part of a long-term goal to reach £50 million turnover and an EBITDA of £10 million.
“Because we have the facility with Triple Point, rather than doing one acquisition every two years, we can now do two or three a year,” he said.
Redsquid recently gained a foothold in the education sector through the Covue acquisition and increasing penetration of the wider public sector is likely to be a key consideration for future M&A transactions, as well as filling gaps in its technology offering and expanding its geographical reach beyond its London/Oxford/ Birmingham heartland, which it serves from premises in Borehamwood and Oxford.
Today, Redsquid has circa 55 employees and provides products and services to 1,200 business customers across its five main areas of IoT, voice and data, cybersecurity, IT and cloud.
“I would say 40% of our revenue now comes from IT managed services – security, cloud, IT support. Around 40-42% comes from comms and the rest from connectivity and hosted. It’s a nice mix, considering we were 80% mobile in 2019.”
A unique brand
There are plenty of businesses in the IT sector that have diversified, grown and scaled in this way and while Raithatha admires what they have done he wants Redsquid to carve out its own path and its own distinct identity.
“We want our brand to be unique and to have a real community feel to attract the next generation of talent and customers to Redsquid,” he said.
“For customers, we want the brand to denote quality. We’re not going to be the cheapest but you’re going to get wonderful service and you’re going to get wonderful technology that’s going to change your business, make you more efficient and help you to scale. And we’re a sustainable business. We are carbon neutral and are on the way to becoming B Corp certified, so we hopefully can continue to make a small difference to the wider world.
“For the talent that comes on-board over the next two, three, four or five years, I hope they will be able to say ‘Wow, I’ve had a massive impact on this business – and I’ve gained so many new skills’.
“Can we create this distinctive culture while we scale? I think we can. Over the next two to three years, I believe we can create something really unique and special. We want Redsquid to be the partner of choice for our customers and the employer of choice in the technology sector – while we continue to follow our purpose of making a difference.”
www.redsquid.co.uk camilla.karm@redsquid.co.uk
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