Holmdel-based Vonage Holdings Corp. has entered into a definitive agreement to acquire privately-held Telesphere Networks Ltd., an industry-leading provider of Unified Communications-as-a-Service (UCaaS) solutions to larger enterprises in the small and medium business (SMB) sector, for $114 million in cash and stock.
Telesphere offers a comprehensive suite of cloud voice and UCaaS services, including advanced call center solutions, collaboration, mobile office and HD multi-point video conferencing. Telesphere has provided cloud communications since 2006 and has built a national, cloud platform that is especially well suited to address the needs of larger SMBs with regionally distributed offices.
“A year after Vonage moved into the rapidly growing UCaaS market, we are substantially expanding our presence within the sector through the Telesphere acquisition. This is an important next step in the continued execution of the Company’s long-term growth strategy,” said Marc Lefar, Chief Executive Officer of Vonage. “As we have demonstrated, the use of Vonage’s scale, brand, balance sheet and cash generation to invest in the acquisition of growth businesses has been very successful. Vonage Business Solutions’ annual revenue growth has accelerated from 38% to 52% in a year, and we are confident in our ability to accelerate growth at Telesphere as we bring it under the Vonage umbrella.”
Combined Business with Leading Scale in UCaaS
Telesphere is highly complementary to Vonage Business Solutions (“VBS”). With the addition of Telesphere, Vonage will now be able to provide a comprehensive and compelling range of cloud-based solutions to address the needs of a wide range of enterprises.
Telesphere’s average seat size per customer is more than 40, and average monthly recurring revenue per customer is nearly $3,000. Telesphere’s 2014 revenues are expected to be approximately $40 million, with more than $50 million of revenue already under contract for 2015. Vonage will pay a multiple that is two times or less estimated 2015 revenues.
Recognized for its strong technical and operational expertise in UCaaS, Telesphere was ranked as a top provider in Gartner’s 2014 Magic Quadrant for UCaaS. Similarly, Telesphere’s auto-provisioning and monitoring tools, critical for successful installations and ongoing management at larger multi-location businesses, received Internet Telephony magazine’s 2012 BSS/OSS Excellence Awards by TMC.
Clark Peterson, CEO of Telesphere, commented, “Vonage already has a strong leadership position in hosted cloud communications and SaaS solutions through Vonage Business Solutions. Our two businesses complement each other well and will fortify Vonage’s scale in the high growth market for unified communications. As UCaaS continues to evolve and adoption grows among businesses of all sizes, Vonage and Telesphere will be at the forefront of this growth. I am very excited about our future together.”
Mr. Peterson will join Vonage as President of Telesphere, a Vonage company, upon closing. Mr. Peterson has more than 25 years of experience in the communications industry and currently serves as Chairman of the Cloud Communications Alliance.
Alan Masarek, who will become the Chief Executive Officer of Vonage effective November 6, commented, “Through the acquisition of Telesphere, Vonage is well positioned to provide an expanding range of unified communications services beyond those offered today, and to further penetrate the large and rapidly growing UCaaS market. We welcome the Telesphere team to the Vonage family and look forward to working together on our mission to become the premier provider of communications services for consumers and businesses.”
Transaction Terms and Financing
Under the agreement, Telesphere shareholders will receive total consideration of $114 million comprised of approximately $91 million in cash and approximately 6.86 million shares in Vonage common stock representing $23 million, subject to customary closing adjustments and indemnity escrow arrangements. The transaction is expected to close in 2014, pending regulatory approvals. Cash consideration for the transaction will be financed through available cash and Vonage’s existing $125 million credit facility.
Evercore provided a fairness opinion and served as financial advisor and Weil Gotshal & Manges as legal counsel to Vonage in connection with this transaction. Wells Fargo Securities, LLC served as the financial advisor and Snell & Wilmer as the legal counsel to Telesphere.Related Articles: