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iomart on takeover trail with 1 acquisition

Business AM - 1999-08-29

by Douglas Friedli

Iomart, the telecoms and internet service company, has started on the acquisition trail by taking over NSL, an Edinburgh web host.

Iomart paid a nominal sum, thought to be 1, for NSL, but will have to take on liabilities of at least 138,000.

The deal will enhance iomart?s efforts to build on its consumer base by expanding into the business market.

NSL has a strong list of corporate clients, including the Royal Bank of Scotland, Edinburgh City Council, Scottish Courage and Dunlop Slazenger.

It will also give iomart access to 27 experienced technical staff at NSL, Max Royd, an analyst at Peel Hunt, said: ?They would probably have had to pay head hunters ten grand a pop to find these people if they did it from scratch.?

And it will give iomart, which is based in Glasgow, a presence in the capital. This will be important as it progresses with its strategy of rolling out broadband ADSL (asymmetric digital subscriber line) telephone services in each of Scotland?s cities.

The Edinburgh office is expected to become the centre of iomart?s web hosting activities, which include customers such as Virgin?s small business web service.

This is iomart?s first acquisition since it floated this spring, and further takeovers are likely to follow. The company?s stated strategy has been to go for bolt-on acquisitions in the internet sector.

Angus MacSween, the chief executive, said recently that he was looking for companies to take over, ?preferably cheap ones? but his company can call of firepower of up to 40m.

NSL, which was set up by Andrew Veitch and Clare Scrivener in Mr Veitch?s living room in 1995, has established a strong reputation in web hosting and domain name registration.

It had planned to float shares earlier this year, but was caught out when market sentiment turned against internet companies.

An attempt to grow by taking on more qualified staff increased its capacity but also created more debt.

Mr Veitch, who had a large stake in NSL, said selling to iomart was the only way NSL could continue to compete with large US companies moving into the web hosting market, and at the same time gain a broad-band telecommunications capacity.

He and Ms Scrivener will leave NSL once the handover is complete in order to start a new venture.

Mr Veitch said, ?We have built a lot of the internet infrastructure of Scotland. I?ll be leaving with nothing but a warm feeling.?

Highlands moving from tourism to new technology Stornoway call centre leads the way in demonstrating the viability of relocation Douglas Friedli

If the Highlands? recent past has been tied up in tourism and fish farming, the future is likely to depend more on new technology and call centres.

Far from the science parks and universities of the central belt, locating above the Highland line may seem a strange idea. But this is part of what the communications revolution is about allowing companies to locate in places which might not have been suitable before. One of the companies leading the way has been iomart, the internet and telecoms service provider, which set up a support and network development centre near Stornoway, on Lewis, in early 1999.

Iomart, which runs the Biznet internet service for Virgin as well as its own Madasafish consumer service, employs 90 people at the centre. Angus MacSween, iomart?s chief executive, spent some of his primary school years on Lewis. In his previous roles at Teledata and Scottish Telecom, now called Thus, he had investigated the possibility of siting a call centre on the island.

He said: ?I tried to get the two previous companies to go there. There is a workforce there, which is not being properly utilised. We have employed a lot of graduates who would not otherwise be able to find suitable work.?

One of those who has been able to stay is Neil Finlayson, chief technical officer at the centre and a native of Lewis. He said: ?In the past, most of these would just have left the island forever. It would be nice if a few more places like this opened up.?

As well as retaining locals, the company has attracted people from further afield, including the call centre?s Dutch manager, Jan Schouten, formerly with IBM in Greenock.

Part of the attraction for Mr Schouten is the contrast between the quiet, semi-rural atmosphere of the outskirts of Stornoway and the bustle of the centre.

Mr Schouten enjoys both, but would prefer to see the laid-back aspect stop at the front door. ?People sometimes ask: what can there possibly be on Lewis? - but here we hope we have created an atmosphere of customer service.?

Staff turnover is lower than in the central belt because there are few similar places to work. The flipside is that iomart cannot afford to upset large numbers of staff, or its suppliers.

Mr Schouten said: ?if a supplier in Greenock lets you down, you could just tell them to get lost. But here you might need them again, so you can?t afford to be rude.?

In the past, the problem for the Highlands has been that long distances have made it relatively expensive to move goods to the major centres of population.

But the advantages include the lower price of land, the lifestyle, which suits many, and the fact that wages can sometimes be lower.