Edinburgh-based Castle Street Investments is set to buy the IT and cloud services provider Selection Services Investments in a £34.8 million deal.
The AIM-listed investment firm, which was created by chairman Bill Dobbie following the sale of his Cupid online dating business, said it has conditionally raised £30m through an over-subscribed share placing which will fund the proposed reverse takeover acquisition.
Tech investment firm MXC Capital will take a 24.9 per cent stake in Castle Street Investments and MXC partner Andy Ross will become Castle Street’s chief executive.
Mr Dobbie said: "It has been our stated investment strategy to seek investment into a profitable and cash-generative business with an experienced management team, good revenue visibility and growth opportunities.
“We believe that in Selection we have identified a business that meets these criteria and look forward to an exciting future."
Mr Ross said that the high degree of fragmentation in the smaller end of the IT services sector provided an “exceptional opportunity” for a buy-and-build platform focusing on IT solutions and cloud services.
“The combination of a strong balance sheet, the new management team we are building and MXC’s proven track record in the sector is a powerful one that will set us apart and presents a great opportunity to deliver value for shareholders,” he said.
Selection Services, which has offices in Reading, Bristol, Bromley and Croydon, has over 500 customers and annual revenues of around £35m.
The acquisition has to be approved by shareholders at a meeting on January 20.
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