Telefónica Tech buys Glasgow’s Incremental for £175m

Madrid-based Telefónica Tech said it has acquired Glasgow-based data and analytics company Incremental, one of the fastest growing Microsoft partners in the UK, for up to £175 million, including potential contingent payments linked to its future performance.

Launched in 2016, Incremental Group has been a Microsoft Business Applications Inner Circle member for the past three years and is one of only two partners in EMEA on Microsoft’s Global Advisory Board for data analytics.

Incremental has annual revenues of almost £40 million.

It has more than 350 employees, which brings Telefónica Tech UK&I’s headcount to around 1,000 employees.

The UK subsidiary now contributes almost 25% of Telefónica Tech’s global workforce.

Incremental was founded by CEO Neil Logan, CFO Stuart Kerr and chief commercial officer Craig Donnelly.

Incremental has offices in Glasgow, Aberdeen, Manchester, Surrey, and London, Bulgaria (Sofia) and India (Pune).

Customers include The Pensions Regulator, National Highways, Imperial War Museums, Admiral Insurance, Virgin Money, Harbour Energy, Heathrow Airport and ASOS.

“The amount of the transaction implies valuing the company at 13.7 times its gross operating profit (EV/OIBDA) and 14.2 times its operating cash flow (EV/OpCF), considering their results expected for the next fiscal year and excluding potential synergies,” said Telefónica Tech.

“With this new acquisition, Telefónica Tech significantly increases its scale and competencies in Microsoft technologies, making it one of Microsoft’s largest partners in the UK, with 16 Gold Competencies and 5 Advanced Specialisations.

“With these capabilities, Telefónica Tech consolidates its leading position in the UK market, considered to be the largest and fastest growing IT services market in Europe.

“The addition of Incremental’s business applications, power apps, data analytics and management capabilities to Telefónica Tech UK&I’s cloud services portfolio will enable it to enhance the end-to-end cloud offering for mid-market, large enterprise and government customers.”

Telefónica Tech CEO José Cerdán said: “We warmly welcome Incremental Group, and are delighted that this acquisition enables us to strengthen our position as a leader in the UK market for IT services.

“We are now able to provide end-to-end Microsoft services, including digital transformation, managed services and data analytics, and achieve attractive cross-selling synergies with Telefónica Tech UK&I, complementing and positioning us as a leading Microsoft-focused company in the UK.”

Neil Logan, current CEO at Incremental Group, said: “I am immensely proud of what Incremental has achieved since our inception a little over five years ago.

“As we looked ahead to the next stage of our development, it was important that we secured Incremental the right support for the long term.

“Becoming part of Telefonica Tech propels us into the next phase of our journey and enables us to further scale the business, creating exciting opportunities for our people and our customers.”

In a statement, Incremental Group said: “Incremental Group has been acquired by Telefónica Tech in a deal that secures an exciting future for the Glasgow headquartered business.

“Employing 350 people, with annual revenues of almost £40m just over five years since its launch, Incremental has ambitions to continue to rapidly scale over the next five years.

“The backing of Telefónica Tech enables the group to make strategic and long-term investments in recruitment and development at scale.

“The acquisition also re-enforces Incremental’s credentials to deliver transformational digital projects at scale.

With performance remaining strong throughout the pandemic, Incremental has experienced an acceleration in the demand for services amongst its customers and the wider market.

“The strategic acquisition of data specialist, Adatis, in October 2021 combined with its existing business applications capabilities enable the group to deliver end-to-end digital transformation to customers.”

Martin Hess, CEO of Telefónica Tech UK&I, said: “This is an incredibly exciting acquisition for Telefónica Tech UK&I, it is a major endorsement of the UK&I market, and Telefónica Tech’s role within it.

“Acquiring strong apps, data and analytics capabilities is the next stage in our journey to be major players in the Cloud market.”

About the Author

Mark McSherry
Dalriada Media LLC sites are edited by veteran news journalist Mark McSherry, a former staff editor and reporter with Reuters, Bloomberg and major newspapers including the South China Morning Post, London's Sunday Times and The Scotsman. McSherry's journalism has also appeared in The Washington Post, The Guardian, The Independent, The New York Times, London's Evening Standard and Forbes. McSherry is also a professor of journalism and communication arts in universities and colleges in New York City. Scottish-born McSherry has an MBA from the University of Edinburgh and a Certificate in Global Affairs from New York University.