After Calyx … discovering Unity in purpose

17 Nov 2010

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The former voice, data and security business of Calyx that was saved from receivership by an MBO involving private investors is gaining ground in retaining recurring income which accounts for 65pc of the business, its new managing director told Siliconrepublic.

In September, one of Ireland’s most acclaimed technology services firms, Calyx – which had been in quite an acquisitive mode for a number of years, snapping up IT firms in Ireland the UK – went into receivership as a result of the costs of buying the businesses.

Despite a sound underlying business that combined voice and data communications, security and enterprise applications and a turnover in excess of €20m, Calyx’s bank Anglo Irish threw the board of Calyx a curveball and called in the receivers.

MBO

However, a management team led by former Calyx CFO David Hargarden and group manager Declan Hughes were joined in mid-September by a number of private investors who wish to remain anonymous.

Hughes is philosophical about what actually happened and says the MBO and the technologies and skill sets at the former Calyx Irish operations have prime-pumped the company for growth, as well as safe guarding 75 full-time and a further 25 contract workers’ jobs.

“The company was over leveraged because of the acquisitions and we approached the bank with a plan to resolve this and the board were working hard on a particular plan but at the last minute, the bank sold the debt, blindsided the board and the first thing we knew the receiver was called. We were just two days away from concluding our original plan.

“The Irish part of the business was always profitable but given that after the acquisitions two-thirds of the business was UK-based it was difficult raising cash,” he said.

Private equity firm Better Capital acquired the bank debts for Calyx Group from Anglo Irish Bank and placed the services-based networking reseller into administration. It was the second time that John Moulton, chairman at Better Capital, has invested in Calyx; he backed a management buyout led by then-CEO Maurice Healy in 2007 as managing director at venture capitalist Alchemy Partners.

“We had a look around and decided what was needed in Ireland was a software business and this left the way open for an MBO,” Hughes added. “We raised the money from private equity investors and now we’re focused on retaining business and we’re succeeding with this.”

Hughes explained that there are four parts to Unity’s business – the security practice, its voice business, a voice recording business and a data infrastructure business.

Opportunity in unified communications

“We have looked at where new technologies are emerging and we believe unified communications (UC) is going to be vital going forward. We are one of the few companies with the voice and data expertise to deliver business benefits, as well as security. But also, if you look at the voice recording business, there is a huge opportunity in combining voice recording with security to facilitate the protection of credit card transactions by telephone.”

Focusing on IT as a utility rather than absorbing the expense of running a line of business applications is where Hughes sees a vibrant future for the organisation. He believes also that UC has yet to take off in a meaningful way because there is no one in the marketplace explaining how UC will benefit a business.

“People who were first to market have struggled to get traction. But we believe the market is just right now and we intend to be first to go to market with a business solution that will benefit businesses.

“We have learned that in technology sometimes it is better to be just behind the cutting edge of a major trend rather than at the cutting edge.”

Post-MBO, Unity now has 75 full-time staff and a further 25 contractors. The former Calyx software group was absorbed into the UK business that Better Capital acquired.

Returning to the Calyx acquisition saga, Hughes said: “The UK acquisition strategy worked fine at first but the challenge was sustaining that, transitioning it and preventing it becoming a huge cash drain. We worked hard to get the synergies right between the Irish and UK businesses but it became like an oil tanker – slow and hard to manoeuvre.

“Now we’re much more nimble. Our first objective is to retain recurring income. Some 65pc of our income is in the area of managed services and maintenance which involves a high level of remote access.

“However, once we were in receivership, the competition had a field day and targeted our customers. Our focus right now is on securing the business we had and ensuring renewals. Our saving grace has been the fact that our service delivery was always the best. In addition we know the Irish market has gaps that we can exploit and now we’re much more nimble to do that,” Hughes told Siliconrepublic.

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Editor John Kennedy is an award-winning technology journalist.

editorial@siliconrepublic.com