Cavell Invest Summit: A Preview of What's to Come

Are you interested in the M&A telecom industry? The latest podcast episode gives us a sneak peek into what we can expect from the upcoming Cavell Invest Summit.

Our host, Finbarr Goode Begley - Senior Research Analyst is joined by Matthew Townend - Executive Director at Cavell Group highlighting the speakers, panel discussions, and networking opportunities that will be featuring on the afternoon of June 28th.

They emphasise the importance of attending industry events like the Cavell Invest Summit for building relationships and staying up-to-date on the latest trends and technologies in the telecom industry. 

Tune in to the full episode to learn more about what's in store for the event and how it can benefit your business. Don't forget to subscribe to the podcast for more insights and updates on the telecom industry.

Transcript

Finbarr Goode Begley: [00:00:00] Hello, and welcome to another episode of the Cavell Cloud Conversations Podcast. Once again, I am Finbarr Begley, one of your regular hosts on this podcast and senior analyst at Cavell covering networking and security. I'm joined today by, I guess a new guest. He's been on one podcast, but he's back again after a while.

 One of the directors of Cavell and the director of the analyst research consulting side of the business. Matt, why don't you introduce yourself a bit, Matt? 

Matthew Townend: Yeah, thanks, Finbarr. I'm Matt Townend, I'm executive director of Cavell and run the research consulting analyst side and, and the diligent side.

 I guess why I'm on here, one of the reasons is I spend half of my life now talking with investors and working on m and a and those sorts of subjects for the group, and working with a lot of people in the industry. So yeah, that's really who [00:01:00] I am. 

Finbarr Goode Begley: Yeah, and I mean, our subject for today.

Very much. You know, we have our summer Invest event coming up. So for those of you who haven't heard of it, we started it I think last year or the year before, and we get loads of top investors from the cloud coms, telecoms industry together in a room to talk about what's happening in the markets and all this other kind of things.

But Matt, maybe you can tell us a bit more about the dates and the agenda for that. Yeah, so 

Matthew Townend: it's, you're right to say it's the second time we've done it in person. So it's the 28th of June. It'll be in, in, in, in London. We did it virtually as we did most things during Covid, and it's really the opportunity to bring kind of the investors and the kind of sea level guys from the industry together.

And really explore the trends. You know, do some networking, look at what's really happening and where the opportunities might be around kind of the m and a and investment space. So it's quite unique. It's quite a, a focused event. So it, but last year we had a, a really good first [00:02:00] face-to-face event, and I'm.

I'm sure actually there were some deals done as a result of that. When I look at what's happened afterwards, but I probably couldn't claim them directly, but I certainly know some of the people who met there ultimately ended up investing. So it's, it's really, it's, and the great thing is it's a half day event, so it doesn't take a massive amount of time at your diary.

It's. Start sort of three o'clock in the afternoon. We've got a couple of hours of sessions really interesting, I'll talk about a little bit later. And then we've got a drinks reception cuz it's the summer. And you know, it's always good to have a, a couple of hours of networking and drinking at the end of these sorts of events.

So yeah, it should be 

Finbarr Goode Begley: good. Yeah, and I, I think the thing is that like a lot of the events and the, the key focus that we do is on taking, you know, what is happening in the industry and sort of like crystallizing it down into this really. Clear agenda that's gonna add a lot of weight in, in what is, you know, quite a short time in terms of the afternoon into an evening, as well as giving space for a bit of networking.

So why don't we pivot [00:03:00] towards that now and let's just talk a bit about what's happening in the industry that's kind of like, prove our credentials, wet people's appetites a little bit. So I mean, where do we start? What's, what's maybe the most interesting investment trend we've seen in, in clouds so far to start?

Well, I, I, 

Matthew Townend: I, I guess the biggest interesting thing has been people worrying about valuations and investment that's coming into the industry was kind of the trends. So lots of doom and gloom about, you know, valuations of some of the public companies, et cetera. But what we've seen recently and very recently, actually we saw last week announced Pure IP was acquired by BCM one, which really demonstrate it if you've got a quality asset.

Mm-hmm. In the right space, there's still a lot of appetite out there and there is a lot of interest from investors. I mean, one of the phrases that a lot of IP friends, I would say, say is, you know, Matt, we are looking for quality assets. We [00:04:00] have got a lot of dry powder. So a lot of these funds have, you know, have capital, which they need to deploy.

Mm. But they have been cautious, I think, about some of the fundamentals. And, but what I'm seeing is if you've got, you know, quality assets in the right areas Then, you know, there is definitely a market for it. We were lucky enough to, to call pure IP one of our customers, and we did some early work with the team there on preparing for that that investment and, you know, definitely is, was a very, very interesting asset, which.

Picked a number of, a number of key kind of key investor hotspots at the moment, you know, international Microsoft focused collaboration enablement focused and just a, a, an a very good quality asset. So I think we're seeing kind of, you know, an interesting change where there's been a bit of doom and gloom around.[00:05:00] 

Kind of valuations and you know, but things are changing. I, I think there's some other big topics which we are gonna talk about maybe now, and we are gonna have as themes at our event as well. I mean, the MSP space has been really interesting. Mm-hmm. So if you look at the uk, look at every market, there's been the growth of through acquisition, mainly some pretty large now MSPs, so, I mean, in the UK you've got all sorts of people like focus.

Babble. There's, you know, southern coms, there's a whole group of them who are, you know, become a hundred million plus on in a lot of cases, businesses, through acquisition and are really, you know, really large businesses, sometimes bigger than the service providers that serve them. 

Finbarr Goode Begley: And is that what you expected, this large consolidation of the industry, or has it surprised you?

Matthew Townend: Well, and it's not surprising me cuz it was, it, it, it's happened because there was a lot of value in the channel. And this is one of the interesting things that we're gonna talk about, [00:06:00] you know, in terms of where margin and revenue and value is flowing. A lot of it has been focused on the channel, both here and in the US because of the la the competition and the.

The, the kind of focus on growth from the service providers meant they were really putting a lot of margin down into the product margins, down into the channels to try and drive that growth. So there's been a lot of investment, interestingly in that, not always in the service provider, because actually a lot of the value flew down through, down to the, to the MSPs.

And I think now, and also there's been this, this consolidation of voice and data and it, and all these things coming together. So there's been this role for a broader based MSP emerge. I think what's gonna be really interesting we'll be talking about at the event is does this consolidation just keep happening?

I mean, there's still plenty of resellers out there, or, you know, is there gonna be some different dynamics? So, you know, there's some questions about [00:07:00] whether the, the product. Margins that have traditionally been supported, which has driven this channel, are gonna be there in the future. Mm-hmm. And does that mean that the MSPs have to change?

Does it mean they just have to get bigger and bigger and bigger in terms of, you know, just having the buying power, et cetera? But do they also need to change the way they focus? Are they too focused on product and they need to get more focused on pro services and broader services in different areas? So I think that's gonna be, it's kind of a really hot topic in the industry.

Mm-hmm. And one that we've done quite a lot of diligence on MSP businesses recently, and it's they're a real mixed bag actually. And one of, you know, so it's, and I predict you can, all our listeners can see if my prediction comes right. I reckon in the next 12 to 18 months, every large M S P group in the UK will either come through new capital or will float.

That's fair. So all of them, all of them are, I [00:08:00] think are now going through a change of, will go through some sort of investment phase or a change of ownership as this dynamic changes. So, and I've already heard about a few of them being, getting ready for that. So 

Finbarr Goode Begley: because they're all, they're all kind of feeling this, this sort of squeeze in a sense in terms of competition increasing.

The amount of services they have to offer increasing. So really they're being pushed into this dynamic of new capital versus ations and things like that by the fact that their competition with their peers is increasing and they either need to acquire more space from those competitors, or, you know, raise enough money to invest and diversify and, and gain, you know, market share.

Would you, would you say that's fair? Is it, I mean, is Yeah. Is this change being driven by competition or something else? I, 

Matthew Townend: I think it's been driven by a, a need for scale. Okay. Which is the competition question that, you know, these guys have grown, but also by a question of [00:09:00] product margin availability as well, because a lot of value has been pumped down to these guys.

Mm-hmm. So as a cloud companies in all shapes and forms, not only in the com side and the networking side, but you focus on on others have been searching for growth at all costs. Yeah. They've been willing to pump more and more value, sometimes their own value down to the MSPs and the channels. Yeah. But as the market is pivoting in terms of now the market is valuing profitability a little bit more, that squeeze is gonna come down into the the channel as well.

And it's gonna be interesting to see. What happens there because some of the guys who are willing to give away 27 points of ongoing margin for their cloud services and pay you nine times, SPS are less willing to do that because their investors now are valuing are valuing EBIT growth you know, and profitability.

Yeah, above revenue, all costs. So [00:10:00] it's been really interesting in the US and in Europe, there's been a lot of investor money. Flying down into the that space. And it'll be interesting how that changes. 

Finbarr Goode Begley: Yeah, it was very much an effect of kind of the Netflix software mindset on the broader telecoms industry for a long time, where it was, if I grow the biggest company then in 10 years time, it doesn't matter that I'm not making a lot of money today because I'm not gonna have any.

Any competition and that, that does work, I think, in some cases for these large consumer organizations, but that hasn't really translated to overall success in the cloud space because diversity is still appreciated amongst supplier, you know, supplier diversity. Things like having competition in the space is still appreciated by a lot of companies who want to be able to change vendors or change providers when things go wrong.

So that mass consolidation model fueled by. A never ending tap of money that doesn't care if you're making actual [00:11:00] profit versus just growing revenue has kind of changed. And I mean, we're seeing it on the consumer side a little bit, but it's interesting to see, I guess, how those changes in the way investors think at an institutional level, at the very top of the food chain filter down to affect the bottom of the channel who are being acquired by other parts of the industry.

Yeah. 

Matthew Townend: And, and, and as I say, there is still money. Don't get me wrong, there's still money for valuable assets. The other, I guess the other big area. So that's kind of the MSP thing and we're gonna be talking about that. The other kind of areas that we are particularly interested is what the hell's gonna happen to the T Nets in the uk.

We are already seeing, you know, there's various people say there's around 150 of people who have looked to build. Alternative networks. So fiber, normally fiber based. And these poor people were told by their investors that the main objective is to build. Mm-hmm. So get in the ground, get the fiber in the ground, [00:12:00] and now guess what, their objectives are being changed slightly.

Mm-hmm. To, you know, what we'd like. We'd like some customers in revenue as well. Yeah. And so I, I just. So we're starting to see rumors of consolidation. Not only rumors, but you know, consolidation happening and people looking at how that's playing out. It's very reminiscent of those who are old enough and you are not quite old enough.

But I certainly am old enough to remember what happened in the cable transition when, you know, NTL Teddy West and some of the older members of the group, and it happened right across Europe and in the US where there was. This con, you know, this massive growth in cable providers used to get people like Cambridge Cable and all these sorts of people, and then they all came back together because scale was important.

But 

Finbarr Goode Begley: that's how I understood it. Like, looking at this historically, and I'm young enough, I can say historically is that not belong? People built all of these networks and they wanted the money [00:13:00] back from their investments, but people. Didn't really realize at the time that the telco return on investment life cycle isn't measured in one year or two years or three.

It's actually, you have to be willing to sit there for 20 and say, well, we put that fiber in 20 years ago and it paid itself off 10 years ago and we've been making profits since then. But the time timescale, and I mean, do you think maybe these alt nets didn't really understand the payout timescale that they were gonna have to operate 

Matthew Townend: on?

Yeah, no, I think it, sometimes it's the investors, there are some very good infrastructure investors who, who have that approach, you know? Mm-hmm. They talk like, I mean, I was at a conference over day and people talking about 50 year business cases and stuff. Yeah. You know but unfortunately there's been a lot of money that's available that's gone into this kind of old net race.

And there's a lot of assets which. The business cases just don't, yeah. Don't stack up. They're not able to get customers on board. Yeah. You know, they're not able to, they, so we are doing [00:14:00] more research and looking at this space, as you know, and it's kind of interesting to look at the go to market of some of these companies and I said there's a new focus, I think on the investor's side, less interested in how quickly can you get the fiber in the ground, more focused on.

Kind of how you go to market, how do you drive revenue, how do you drive customer acquisition, those sorts of things. So that's kind of an interesting area, but one that's pretty, and, and the other thing, we're gonna talk a little bit about the event as well. No, not a little bit because we are gonna be asking the whole question about what investors and the cloud comms companies, what they're thinking about the opportunities.

So we are really lucky already to have. A co you know, three really good investors confirmed. So we've got ldc inflection, who some will know LDC have invested in number groups like Kev and Babbel and those sorts of things. And we've got, we've got inflection who, amongst other things, radius [00:15:00] d dws, big investors in this space.

And we've actually Also got a smaller P fund who'd recently been coming into this space company called Axiom, who bought into a kick sea. We've got those guys talking about what investors are thinking about, but then we're also lucky, already confirmed that we are gonna have Dan from CEO e o of Destiny and Stein, c e o of en reach to the big groups in the cloud space speaking about what they're seeing from an investment from investors.

They're both PE backed companies, so we are gonna have a real look at. What are the opportunities around cloud coms and lots of questions like, do you need to diversify? You know, what's the impact of the, the, the big question, what's the impact of Microsoft? What do you what other services do you need to offer?

You know, do you need to offer SD ware and your kind of area and networking, those sorts of things, as well as just being a pure player. So I think that's gonna be pretty interesting because obviously one of the. A lot of the public valuations in that space were really hurt. I mean, [00:16:00] a by a, you know, all the big guys.

So not, you know, ring every, every single kind of major cloud player. Got hurt heavily on valuations. So we are gonna really explore. Where the value sits in that market from now on. And I think there's some really interesting angles that people don't often think about there. These businesses, if you look at inReach and Destiny, and Gammer is another one who are, who I'm hoping will speak as well, probably.

And they have all built huge channel businesses. Mm-hmm. So, irrespective of the cloud product, there's a pretty big investment argument that actually what you've got is this amazing channel engine. Where you can put future product down. And you are seeing that now that these companies are offering other products and varying their product portfolio.

So, and they're very strong in the smb, which is a channel which is often very hard to reach. So we're gonna be looking at where the value is and you know, how the, how, what's going on there and how those, those businesses are changing. And I'm getting quite a bit of interest [00:17:00] again, actually in the ucast investment space.

So I think people were scared because of some of the public valuations, but there's lots of people now saying this is a pretty nice business. It's recurring, you know, especially in the sme, we've got lots of loyal customers. We've got br pretty broad product set that we can offer. It's also one of 

Finbarr Goode Begley: those essential utilities that you can never actually switch off in a business.

As long as it's valuable to provide it, it's never going anywhere, you know? 

Matthew Townend: Yeah, they always say that it's, it's fairly recession proof because the last thing you do is turn off your telephone number so your customers can't ring you. But yeah. But yeah, so I think that's gonna be an interest. Very interesting part of the session.

And, and as I say, I get contacted probably, or we do as a business probably by. So 20 odd times a month by PE firms about looking at different aspects and wanting to talk to us. And obviously the other big area is the whole Microsoft and Zoom and Cisco enablement market. Mm-hmm. Which we'll be touching on.

So, you know, [00:18:00] one of the things that Pure IP did very well and I think, you know, and there's, you know, other, other businesses like Call Tower and who have built this enablement mode, which really means. Accepting in the medium and large enterprise you are gonna have Microsoft and Cisco and Zoom, so you might as well work with them and enable them.

Yeah, so there's some really interesting investment opportunities around that space which are emerging and we are working with a number of players in that area. So We should be talking about that topic as well.

Finbarr Goode Begley: 

 Well. Anyway, we don't wanna give away all of the tidbits of wisdom. So if you've liked the initial taste of what we're saying and you'd like to come along to the invest event, or you have any other questions about what's happening in the market the, is the event open to everyone, Matt?

Or do you have to be a specific type of company to come? 

Matthew Townend: No, I mean, In theory open to everyone, but if you're gonna get value, you are probably gonna be an investor. Mm-hmm. Or you are probably gonna be kind of a C [00:19:00] level person from a company that's looking for investment or has got investment and wants to kind of understand how things are going.

So you might be a startup looking for investors, or you might be a kind of, you know, at that next stage. And so yeah, they would be the people who I would suggest You know, we'll be coming along. So, you know that they're the people who we are aiming the event at. Yeah. So you know, that's the, the, the type of audience, and you can find everything you need to know about it on our website as usual.

It, it, it's called Keve Invest Event. And if you go to keve group.com and under invests under events, you'll find the Keve Invest Summit. And as I say it was exceptional last last year, and I'm really excited about this year as again, So 

Finbarr Goode Begley: I think it's, I see a lot of people there. It's gonna be fantastic.

You could probably find a link to the website wherever you found this podcast. So if you found the podcast, you can definitely find our website too. And of course, if you're interested, do just come and get some more information and potentially consider attending [00:20:00] the event. That's it from all of us at the cloud.

Sorry. The Cavell Cloud Conversations podcast once again from Finbarr Begley, Senior Analyst at Cavell joined by Matt Townend, our director. Thank you everyone for listening, and we'll talk to you all soon. 

Matthew Townend: Great. Thanks Finabrr.