Growth Business: To buy or not to buy

Friday 21st July 2006

To buy or not to buy

While the start-up phase of a company’s life can be make or break, the next step in the evolution of a growing business can be even tougher. In every issue of Business XL, Breakthrough Clinic gives one company at a crossroads of expansion the chance to gain free advice on the possibilities for growth from an expert business adviser.

Company history
Simon Rogan is in the enviable position of having founded and grown his company, Sirocom, without ever having to seek external financing. After many years spent providing high-value IT and communications solutions for blue chip corporates such as Xerox and AT&T, he set up an IT business in the early 1990s, but following the acquisition of his shareholding by his fellow partners he was looking to invest his £30,000 proceeds in a new venture. Thus, Sirocom was born.

Initially, the company concentrated on providing secure remote branch-to-branch communication links. However, as the market’s evolved so has the company and the services it offers. Recognising its strengths – ‘best of breed’ technology and technical know-how – Rogan orchestrated a move from a technology-focused organisation to a service-based ethos. Initially, the company diversified into providing additional internet-based services but Sirocom continued to follow the market to become a leading global virtual network operator, managing national and international converged virtual private networks and remote workforce solutions that provide combined voice and data communications.

Sirocom has more than 500 customers including Abbey, HSBC, STA Travel, BSkyB, Cadbury Schweppes and the Royal Borough of Kensington and Chelsea. They were attracted to Sirocom by its value proposition and offer of improved service standards. Sirocom’s success has not gone unrecognised and the company has been included in the 2005 Gartner Magic Quadrant for Pan European network service providers, appeared in the Sunday Times Tech Track 100 for the past four years and the Independent on Sunday Deloitte 100.

According to research conducted by the Economist Intelligence Unit (EIU) in a global survey of 254 senior executives, significant cost savings are available through remote working. Lowering broadband and Voice over IP (VoIP) costs will drive the growth of remote working with 80 per cent of home workers using VoIP in two years’ time according to the EIU. Given this growth, Sirocom is well placed to capitalise and is forecasting significant growth itself over the next three years.

Current challenges
Rogan has identified a number of challenges as Sirocom tries to manage its expansion. The company has no debt finance, having funded its own growth from cash flow since inception. However, relying on its own resources is a limiting factor to its rate of growth. Rogan is therefore facing a decision whether to seek external financing to enable the company to expand more rapidly and take full advantage of the current growth in the market. Possible investment could come from business angels, venture capitalist or bank finance, and a decision would need to balance the needs of the business with the requirements of the investor.

Rogan is also currently considering acquisitions as a possibility for future growth and is keeping an eye out for suitable targets. He is also not averse to the prospect of Sirocom one day being acquired by a parent company with more resources, though Rogan says there is more he wants to do with the company before being completely bought out.