Nasstar plc

Hosted managed and cloud computing services

Visit the Nasstar website
Status Realised
Period Jun 11 – Feb 20
Headquarters Telford, UK
Sources: Takeover price LSE, company financials FY19

Company
At the time of our first investment Nasstar was an emerging provider of managed and cloud computing services. Management executed an organic and acquisition led strategy to grow the business, embedding efficiencies whilst up and cross selling products into the growing customer base as the market for managed and cloud services expanded.

Investment rationale

  • Expanding market for outsourced managed and cloud computing services
  • High levels of repeat an visible revenues (>90%)
  • Strong operating margins and significant operational gearing benefits from new revenues
  • Attractive cash cycle in the Business model

Realisation
We accepted a 12.88p per share, £79m recommended cash offer for Nasstar in February 2020 from GCI, a private equity backed industry consolidator. The purchase price represented valuation multiples of 2.5x historic revenues, 11x historic EBITDA and a free cashflow yield of 5.2%.

Kestrel involvement, actions and impact
After making  a small initial investment in 2011, we gradually built our stake before committing to a number of funding rounds in 2013 and 2016 in support of acquisitions, to reach 13% ownership position by 2020.

From early on, we advocated for an acquisitive growth strategy in what was a fragmented but consolidating market. We provided cornerstone funding for a number of key acquisitions, whilst also agitating for improved business efficiency which was ultimately delivered through the successful Nasstar 10-19 initiative. We identified and recommended a relevant non-executive director with extensive M&A experience to mentor the executive team and assist the board in delivering its strategy. This individual remained a valued board member until the takeover by GCI.

Kestrel was itself a hosted desktop customer of Nasstar.