Megapath has just crossed our radar today, announcing that they will be acquired by leading Cloud Computing provider Fusion for a whopping $71.5 million. Fusion, who has a strong basis in cloud communications and overall computing, seems to have acquired Megapath to gain an already established UCaaS solution.

Fusion seems to be quickly building up their services, looking to break into the top industry leaders, and Megapath seems like a solid choice to help them do just that.

The Details

Just announced today, Fusion who is based in New York, NY will be taking full control over Megapath, who is based in Pleasanton, CA. Like I said, Fusion already provides integrated cloud solutions to small, medium and level large businesses. Their “advanced, proprietary cloud service platform enables the integration of leading edge solutions in the cloud, including communications, contact center, cloud connectivity and cloud computer.”

Megapath, on the other hand, is a highly regarded Hosted VoIP and UCaaS provider — in fact they made our list of top Nextiva alternatives. In fact, claiming they are only a UCaaS provider is selling Megapath a bit short, since overall they provide:

  • Hosted PBX
  • Unified Communications
  • SIP Trunking
  • Call Center
  • Online Faxing
  • Business Internet (Ethernet, T1, DSL, Broadband, Fiber Optic)
  • SD-WAN
  • Network Security (Unified Threat Management)
  • Ipsec VPN
  • MPLS

With fusion offering services like their Fusion360 platform, FusionSIP, internet access, MLPS, SD-WAN and threat management to name just a few, it makes sense why the provider felt that Megapath was a solid fit to help expand not only their portfolio, but also their existing end-user base.

Overall, this transaction definitely seems like a good move for Fusion, and an interesting one for Megapath. We are a little surprised by the closing price of $71.5 million, expecting Megapath to bring in a bit more cash. But that’s just one quick highlight, Fusion’s announcement points out a few more key details:

  • Contributes additional financial scale with approximately $70 million in annual revenue, 95% of which consists of contracted monthly recurring revenue (MRR), and adjusted EBITDA of approximately $15 million including anticipated cost synergies
  • Adds more than 8,000 small and medium business and large enterprise customers, with an average monthly revenue per customer (ARPU) of $750 and 1.0% monthly churn
  • Provides a robust, customizable and highly scalable back office/OSS platform that is expected to be utilized across the full company to support enterprise customer needs and increase efficiency
  • Adds approximately 45 quota-bearing sales representatives across direct and indirect sales channels as well as a number of distribution partners, driving upselling and cross-selling opportunities and deepening Fusion’s strong relationships throughout the Channel Partner sales channel
  • Brings a highly capable staff of experienced cloud services professionals with expertise to facilitate more rapid integration of the businesses and execution of Fusion’s strategy

Matthew Rosen, Fusion’s Chairman and CEO, said:

“This transaction is further evidence that Fusion is rapidly building a cloud services industry leader around our unique and compelling single-source strategy. MegaPath is an ideal fit with our strategic objectives as it adds a diverse, high-value business customer base, a team of cloud services experts, and incremental financial scale, with a high percentage of MRR, high ARPU and low churn relative to industry averages. Given the similarities between our businesses, we expect the MegaPath acquisition to facilitate the customer, operational and financial integration of Birch, enabling us to drive Fusion’s strategy more efficiently across the entire organization.”

The Bottom Line

We were a little surprised at this announcement, especially to hear the price that Megapath is being acquired for. However, when you look closely at both providers, you can easily understand the motivation behind this move. Megapath stands as a very strong fit into Fusion’s existing solutions, and expands their service functionality with a new UCaaS platform.

Megapath also brings with it a large customer base, and his acquisition allows customers to benefit from the same levels of high service quality, customer care and innovation from this new combined force. We’re curious to see how this move pushes Fusion even further in the market, and where they might be in a years time. We’ll be keeping a close eye in the next few months.