Fusion Communications merges with Birch to create $575m cloud and business services company

Fusion Communications merges with Birch to create $575m cloud and business services company

US cloud provider Fusion Communications is to expand via a takeover of the cloud and business services operations of Birch Communications.

The combined company will have a total pro forma revenue of $575 million a year and adjusted EBITDA of $150 million. The deal does not include the consumer arm of Birch.

“This acquisition is a major milestone in Fusion’s targeted and disruptive strategy of becoming the leading single-source cloud services provider to business and enterprise customers,” said Fusion CEO Matthew Rosen.

Following the deal Birch’s existing owner – private equity company Birch Equity Partners – will own 75% of the combined company and Fusion’s shareholders will own just 25%. Fusion, whose shares are quoted on Nasdaq, will take over Birch’s existing debt of $458 million, “which is expected to be refinanced along with Fusion’s existing debt”, said Fusion, whose management will run the combined company.

Vincent Oddo, CEO of Birch Equity Partners, said: “Matthew Rosen and his team have a unique and compelling strategy for addressing the challenges that so many businesses face when migrating to the cloud. Time and again, Fusion has demonstrated its ability to deliver innovative and integrated customer solutions, firmly establishing the company as the ideal partner for Birch. We are confident that the combination of our two companies will create significant value for our customers and all stakeholders.”

Rosen has been CEO of Fusion since 2000. Oddo, a founder of Birch Equity Partners in 2003, was president and CEO of Birch Communications until last year. His career in telecoms includes senior vice president at the former BellSouth, now part of AT&T.

The combination will have more than 150,000 business customers across North America on a fully IP-based network, with 30 data centres, 31,000 fibre route-miles of network, and metro fibre assets in 11 major markets. Monthly recurring revenue provides 87% of total revenue, said Fusion.

The combination is expected to create one of the largest cloud services providers in North America, with more than 150,000 business customers and a 100% Internet Protocol-based network, including The combined customer base is expected to demonstrate strong fundamentals, with monthly recurring revenue comprising approximately 87% of total revenue.

Rosen said: “This combination will immediately move Fusion into the top tier of cloud services providers and establishes a robust platform from which to pursue aggressive value enhancing initiatives through both organic growth and strategic acquisitions.”

Birch, founded in 1996, covers the US, Canada and Puerto Rico, and has 600 PoPs in 22 states, 400,000 metro-fibre lit buildings, with 31,000 fibre route miles and four data centres.

Birch Equity Partners says it leads “equity investments that range in size from $1 million to over $10 million in high-growth, expansion-stage, privately held companies”.

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