Savvis Set to Acquire Canadian Managed Services Provider

Savvis Set to Acquire Canadian Managed Services Provider

Savvis Inc. appears set to purchase a kindred northern spirit in Fusepoint Managed Services Inc. In fact, Savvis inked an agreement May 28 to purchase Fusepoint, which is based in the Toronto area and markets to mid-sized and larger companies in Canada. Here's a closer look at this managed services acquisition, including the deal's valuation and financial multiple.

Savvis plans to acquire Fusepoint, a M/C Venture Partners portfolio company, for $124.5 million in cash -- or roughly three times Fusepoint's 2009 revenues. The transaction is expected to close in early summer, according to Savvis.

Fusepoint service lineup maps pretty closely to what Savvis is doing. Both companies pursue managed hosting and cloud services. Fusepoint targets Payment Card Industry Data Security Standards as a niche; Savvis plays there as well as part of its security assessment services. Fusepoint provides SaaS hosting services and Savvis does business in SaaS as well. Officials at Savvis have pointed to SaaS customers as among the largest consumers of its cloud services.

“In general, their managed services business blends very well with ours,” noted Jim Ousley, Savvis’ chairman and CEO, who spoke during a teleconference announcing the deal.

The acquisition mostly provides geographic reach for Savvis.  Ousely called international expansion “one of our most important goals,” adding that the company plans to look at acquisition opportunities in China, India, and continental Europe.

In Canada, Savvis’ Fusepoint deal will provide the company with data centers in Toronto, Vancouver, and Montreal -- all told, some 40,000 square feet of sellable space. Ousely pointed to Toronto, Canada’s financial hub, as an opportunity to provide colocation and managed services capabilities for Savvis’ financial services customers with operations up north. Evidently, Savvis won’t be tripping over too many Fusepoint customers in the financial sector. Ousely said Fusepoint lacks a big presence in that particular vertical.

Greg Freiberg, Savvis’ chief financial officer, said half of Fusepoint’s revenue is in managed hosting with 30 percent in colocation and the balance in application services.

Fusepoint, for its part, gains a much larger partner: Savvis generated 2009 revenue of $874.4 million, while Fusepoint’s 2009 revenue was $41.7 million. The extra clout can’t hurt in highly competitive market.

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