Providence Equity SCG investment backs UK communications provider

The Providence Equity SCG investment brings new private equity backing to a UK provider of communications, connectivity and IT services for small and medium-sized businesses. PE Hub reported that Providence Equity Partners has made a significant investment in SCG and understands the firm will take a significant majority stake, giving the deal relevance for investors tracking consolidation in UK managed communications and IT services.

SCG supplies customers across several sectors, including healthcare, education, professional services, hospitality and construction, according to PE Hub. The company has expanded through both organic growth and acquisitions, and the investment from Providence is intended to support its continuing acquisition strategy.

The transaction is subject to customary regulatory approvals, PE Hub reported. Ares Credit funds will continue as debt financing partners to SCG after having supported the business since 2018.

What does the Providence Equity SCG investment include?

The deal gives Providence a significant investment in SCG, and PE Hub reported that Providence is expected to hold a significant majority position. In a private equity transaction, a majority stake gives the investor control of the company, while management can remain invested and continue to run day-to-day operations if agreed as part of the deal structure.

SCG’s management team is reinvesting alongside Providence, according to PE Hub. That structure can align the company’s leadership with the new financial sponsor by keeping management economically exposed to the business after completion.

Leadership changes after completion are limited in the details reported. Daryl Pile will remain chief executive officer, while founder Paul Bradford will become president and join the board.

SCG’s products and customer base

SCG operates in communications, connectivity and IT services, with a focus on UK small and medium-sized enterprises. Its proprietary platforms include Surgery Connect, which is used by GP practices, and Evonex, which is aimed at small businesses and schools, according to PE Hub.

Michaël Vervisch, managing director at Providence, said SCG had become a trusted IT and communications partner for thousands of UK SMEs, citing customer service, sector expertise and communications infrastructure. He also said Providence expects demand to grow as SMEs seek providers that can manage connectivity, cloud communications and managed IT needs through an integrated offering.

For business customers, integrated communications and managed IT services can combine multiple operational functions under one provider. In practice, that may include connectivity, cloud communications and outsourced technology support, areas cited by Providence in its rationale for the investment.

Advisers and financing partners

Providence’s financial adviser on the transaction was Raymond James, PE Hub reported. White and Case advised Providence on M&A matters, while A&O Shearman advised on financing.

SCG was advised by Houlihan Lokey as financial adviser and Osborne Clarke as legal adviser. Ares Credit funds will remain in place as debt financing partners, continuing a relationship that has been in place since 2018.

This story draws on original reporting from PE Hub.