UK managed services provider Claranet has announced its intention to acquire cloud-focused rival Star for £55 million.

Claranet has annual revenues of £70 million, and says the combined company will have annual sales of £120 million. That puts Star’s annual revenues at around £50 million, just short of the acquisition price.

“This announcement confirms our ambition to become the clear European leader in the delivery of managed services,” said Claranet CEO Charles Nasser. “This is nothing short of a British entrepreneurial success story, as both companies were founded here in the UK.”

According to Kate Hanaghan, research director for infrastructure services at TechMarketView, "the increased scale and broadened range of offerings makes this a logical move. And it’s good timing too as the number of buyers in the mid-market looking to either farm out in-house infrastructure services to a third party, or drop incumbent suppliers for a more flexible and cost effective as-a-service approach, just keeps on growing.

"The proof of the pudding is in the cross-selling but I think the similarities between these two means they have a good chance of making that a success."

"I can’t help but also note that this is one UK company buying another," Hanaghan added. "In other words, we’re not losing yet another home-grown entity to a non-British buyer."

Star was founded in 1995 by brothers Ben and Jos White. They went on to found MessageLabs, the cloud email security provider that was acquired by Symantec for £310 million in 2008.

The White brothers are also founding partners of Notion Capital, a cloud-focused venture capital firm that is one of Star’s investors. 

"Having been involved with Star for some 17 years in various guises, including co-founder, CEO and more recently an investor and non-executive director, I have seen it grow and evolve into the business it is today – and of which I am tremendously proud," said Ben White in a statement. "This transaction represents a new chapter. The cultural and strategic compatibility of Star and Claranet is second to none and I’m confident the enlarged group will go on to even greater things, creating significant opportunities for customers, partners and staff.”

Notion Capital said the sale of Star for £55 million represents in excess of a twelve-times return on equity.

“Our strategy is to only invest in what we know (i.e. cloud computing and SaaS) and we think this gives us a strong advantage in the market for both evaluating and supporting companies," said Notion Capital’s managing partner Stephen Chandler. "With a double-digit multiple return on equity, this transaction provides further evidence that the strategy is working well."