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Duke Street supports another build up for 2E2


Duke Street, the mid-market private equity group, is backing a deal by its portfolio business 2e2 Limited, one of the UK's leading vendor-independent IT services providers, to acquire Morse plc, the listed IT services business.

Hutton Collins, a specialist investor in preferred and minority equity capital, is providing the £85m required to finance the acquisition and support 2e2 Limited in its next stage of growth.The combined business will create an experienced UK and European IT services provider. It will benefit from increased scale, greater market visibility and a wider range of skills and capabilities to offer to its customer base. It will deliver these capabilities on customer premises, remotely over the internet or as a hybrid solution. The combined group will also enjoy enhanced capabilities and relationships with the key technology suppliers within the industry.

The combined sales and adjusted EBITDA of the two companies for the year ended 31 December 2009 were £414m and £40m respectively, excluding any synergies. The combined group expects to benefit from cost synergies and cross-selling opportunities within the enlarged customer base and enhanced positioning within its industry sectors.

Duke Street has continually backed expansion plans at 2e2 - this is its third 'buy and build' transaction under Duke Street's ownership since 2006. 2e2 acquired Compel Group plc in March 2007 and Netstore plc in October 2008. It is the second public to private deal for Duke Street in 2010, and its seventh deal in five months.

John Harper, partner at Duke Street, said, "We see this as an opportunity to create an even more exciting business. The combined group will have a broad range of capabilities, a high proportion of service and annuity revenues and healthy margins."

2e2 non-executive chairman Eric Priestley said "This represents a further significant step in 2e2's operational and strategic progress. There is an excellent fit between the two companies and the acquisition consolidates our position as one of the UK's leading vendor-independent IT services providers."

Lazard acted as financial adviser to 2e2 and Duke Street on this transaction.