Nitel Takes Private Equity Investment from London Company, Pursues Organic, Inorganic Growth

Chicago-based Nitel is accepting international private equity funding it will use to continue its growth.

London-based Cinven on Thursday announced a “significant investment” in the technology services provider. Nitel will use the private equity funding to expand its technology platform and pursue other acquisitions.

“Cinven shares our vision, believes in our strategy, people, partners and the culture we have built over nearly two decades, and understands the tremendous growth opportunity in front of us as the evolution of cloud and network optimization continues to accelerate. We look forward to continued success with our new partner,” Nitel CEO Rick Stern said.

Nitel’s Rick Stern

Nitel president Ron Grason said Cinven takes a platform-focused, rather than piecemeal-focused, approach to investment. He said that means the investor will deal with Nitel as a whole.

“They’re not cost-cutting, chopping out parts of an entity, selling off assets and manufacturing earnings,” Grason told Channel Futures. “It’s about continuing and bolstering the strategy.”

Nitel’s Ron Grason

Stern said Cinven showed more interest than any other suitors.

“They seemed to understand our model and the value of our model more than the other bidders, and we felt that they would be an excellent partner in the way that they were going to keep the business whole as it is and continue on as Nitel,” he said.

Bloomberg reports that the deal values Nitel at approximately $700 million. Neither Nitel nor Cinven publicly disclosed the financial details.

Plans

The firm estimated Nitel’s total addressable market as exceeding $28 billion. Specifically, Nitel plays in managed internet connectivity services, especially SD-WAN. The company reportedly will use the funds to expand its technology portfolio beyond managed access, interconnect services and SD-WAN. For example, the company may cross-sell offerings like security.

Nitel also suggested that it may pursue other vendors that sell to small and medium-size enterprises.

Cinven Background

Cinven has made two other U.S. technology, media and telecom acquisitions: Drake Software and Jaggaer. This purchase, however, represents Cinven’s first U.S. telecom acquisition.

The London-based company has also purchased Spanish fiber infrastructure provider Ufinet and French cable operater Numericable. Cinven ended up selling a 21% stake of Ufinet to Enel X, four years after initially buying Ufinet.

Grason noted that Cinven has historically looked for three times its return on investment.

In addition, he said Cinven favors “founder-run” companies. Stern and Grason founded Nitel in 2003. The company has established itself in the agent channel with “double-digit organic growth and strong cash conversion.” Cinven partner Chris Good praised Nitel’s organic growth.

Cinven’s Chris Good

“Not only has Nitel delivered a market-leading offering, capitalizing on the rapid growth of the managed access and SD-WAN markets, but they have built an unparalleled reputation for providing customers with outstanding service levels,” Good said.

Channel Impact

Stern and Grason also said that Cinven embraces the channel. Nitel sells to the enterprise entirely through channel partners. Grason said Cinven expressed strong interest in partners.

“While they haven’t specifically dealt with the channel partners that we work with, they appreciate that it is a significant piece of our business, and they will continue to support the effort 100%,” Sterns said.

PlanetOne’s Chris Werpy

Partner Perspective

Chris Werpy is chief operating officer for PlanetOne, which surpassed $1 million in new Nitel sales in 2020. He said the investment validates the ongoing growth the of the market.

“This allows Nitel to expand their services and footprint, invest in new products, and it gives them access to possible acquisitions of their own,” Werpy said. “They have a long track record of growth, they do a good job and they’re focused on the channel.”