Gresham backed 2e2 acquires the offshore IT services division of XKO plc

An IT services group backed by Gresham, the mid-market, regionally based UK private equity specialist, today announces the successful completion of its latest acquisition. 2e2 Group plc has now made six acquisitions since Gresham first invested £6.6m in the company in July 2003. This latest acquisition is of the offshore IT services division of XKO plc.

Paul Canning, Director of Gresham, who sits on the Board of 2e2 as a Non-executive Director, commented: "This latest acquisition combined with some recent large organic contract wins for 2e2 means it has had a tremendous start to 2005. We look forward to our continued backing of this successful Group."

As a consequence of 2e2's acquisitions and strong core organic growth, annual run-rate revenues are now expected to reach £120 million this year. 2e2 recently reported turnover of £62m and operating profits of £5m for the year ended 31st December 2004. It is targeting annual run-rate revenue of £200 million by 2006.

2e2 was established in 2002 by chief executive Terry Burt, and chief operating officer Mark McVeigh. With Gresham's backing, Terry and Mark are using 2e2 as a vehicle to create a broad- based managed services provider focused on support, solutions, networking and managed services in both the offshore and onshore markets.

The management team brings an impressive track record to this venture. Through a combination of organic growth and a series of strategic acquisitions in 12 countries, they expanded turnover at their previous IT services business, 4Front Technologies, from $11m in 1995 to $253m in 2000. 4Front was sold in the same year to NCR for $270m.

In a unique opportunity to acquire the leading IT Services providers in the Channel Islands and Isle of Man, 2e2 will acquire, for £13.25 million in cash, the offshore IT Services division of XKO plc. Following acquisition they will be re-branded as 2e2 Jersey Limited, 2e2 Guernsey Limited, and 2e2 IOM Limited.

The businesses have considerable expertise in designing, deploying and maintaining IT solutions for a broad range of customers and have a particular strength in the local government and financial services markets. The businesses are profitable and have enjoyed healthy levels of growth over the past few years. They also introduce Business Continuity services to the 2e2 Group which will be an important complementary addition to the existing range of services.

HSBC bank, 2e2's current bankers, provided an additional £14.25m of debt facilities to help finance the acquisition.

Terry Burt, CEO of 2e2, commented: "We are very pleased to welcome XKO's offshore IT Services division into the 2e2 Group. To date it has demonstrated an excellent track record of growth with the two units achieving favourable market positions in their respective territories. We look forward to their continued success as part of 2e2, which will be further enhanced with the support of the entire group."

Paul Canning and Neil Scragg co-ordinated the acquisition for Gresham. Ian Crompton led the deal for HSBC bank together with Shiv Sivarajah and Matthew Osborne. David Raff of DLA acted as 2e2's legal adviser and Ian Paterson of Grant Thornton as its financial adviser. Amanda Woodcock of KPMG Reading advised XKO plc.