Under the terms of the $25 million deal, Vonage will pay $20 million in cash and about 1.1 million shares in Vonage common stock representing $5 million, subject to customary closing adjustments and indemnity escrow arrangements. This purchase price is approximately 1.5 times estimated 2015 SimpleSignal revenues.
Vonage said that it expects to close the deal within the next several weeks and it requires no regulatory approvals.
According to Vonage, SimpleSignal is aligned with its own SMB strategy. The company currently offers a range of voice, video and mobile app services for the SMB market, one that Vonage defines as those that have one to 1,000 employees.
Besides its SMB focus, SimpleSignal also uses BroadSoft’s BroadWorks platform, which is also used by Vonage, to provide the VoIP component of its integrated portfolio of unified communications and managed solutions. By having the same BroadSoft-based platform, Vonage says they will be able to more easily integrate current SimpleSignal customers into its fold.
Vonage will enhance its customer base with the addition of 1,600 additional customers and white label partners. The company will also gain a complementary MPLS network and bring-your-own-broadband (BYOB) delivery options. SimpleSignal has been particularly successful at providing business-quality voice and rich communication features using new technologies to extend MPLS-like quality to BYOB customers.
One of the immediate benefits that current SimpleSignal customers will gain is broader reach. Vonage’s national MPLS network is supported by 16 POPs, proprietary user-friendly Zeus provisioning and customer management tools, and substantial investment in new products and services.
Besides the technology and customer synergies, Vonage will also be able to broaden its reach through SimpleSignal’s nationwide network of indirect channel partners. Having enhanced channel presence will broaden Vonage’s market coverage, providing it with access to new channel partnerships and geographies, and the ability to further penetrate existing relationships.
“SimpleSignal is a natural complement to Vonage’s rapidly expanding UCaaS business,” said Alan Masarek, CEO of Vonage, in the release announcing the deal. “It has a proven track record of providing feature-rich solutions required by larger SMBs, strong channel and strategic partnerships, and a common underlying technology platform.”
Vonage said recurring cost synergies are expected to exceed $1.7 million in 2016 as a result of the deal.
Acquisitions have been one of the key strategies that current CEO Masarek has taken to bolster Vonage’s presence in the SMB space.
In November 2014, the company purchased Telesphere, a deal which gave it a suite of UCaaS services, including call center solutions, collaboration, mobile office and HD multi-point video conferencing, and a MPLS network. Earlier, Vonage acquired Vocalocity, a fellow VoIP provider focused on the small and medium business market for $130 million.