Virgin Media O2 UK and Daisy Group Anounce B2B Merger

The business division of broadband and mobile giant Virgin Media and O2 – VMO2 Business – has this morning announced plans to merge their complementary direct B2B operations with those of the Daisy Group, which aims to “create a major new force in the UK business communications and IT sector” via a new entity.

The new entity, which will have annual pro forma revenues of around £1.4 billion, is to be consolidated by VMO2 with Daisy Group holding a 30% stake in the business (VMO2 holds the other 70%). The new company will be led and chaired by Daisy Group founder, Matthew Riley, and Jo Bertram, MD of VMO2 Business, as CEO.

At the outset, both businesses will continue to operate under their separate brands from their current office bases, although this may well change over time. As usual there’s also plenty of talk about the deal being “projected to drive further growth through greater scale, efficiencies and a combined set of products,” although job cuts are also a possibility from such deals (mergers often look to reduce duplicated roles / costs and facilities etc.).

The dedicated new company, which will serve “hundreds of thousands of UK businesses“, will aim to benefit from its greater scale and expertise, not to mention the ability to more closely access VMO2’s fixed fibre optic and mobile network infrastructure, combined with Daisy’s end-to-end IT and sales management platforms and support teams.

Lutz Schüler, CEO of Virgin Media O2, said:

“Combining Virgin Media O2 Business with Daisy Group is the perfect pairing and creates a new British business connectivity powerhouse and greater competition in the market. For us, it’s a big step forward in our journey to boost B2B growth and provide UK businesses of all sizes with the best digital and connectivity offerings.

Following completion, the new company will have the scale, talent, focus and infrastructure needed to drive digital transformation and provide business customers with an innovative one-stop shop for all their communications and IT needs. We can’t wait to get started on this next chapter in partnership with Daisy.”

Daisy Group Founder and Chairman, Matthew Riley, said:

“This is a significant milestone in Daisy’s 24-year history. This transformational transaction will revolutionise the telecommunications and IT landscape and create the most comprehensive offering for businesses of all sizes across the UK. Growth is top of the political and business agenda – inextricably linked to this is access to world-class IT and communications infrastructure that is integrated and can scale.

Our new entity, which brings together two highly successful companies, will deliver a comprehensive solution for the fast-changing needs of UK organisations supported by specialist teams that have a relentless focus on customer service. It will be driven by the entrepreneurial spirit for which we are known and will catalyse the next phase of our ambitious growth plans.”

Based on full year 2024 performance, the announcement states that the new entity will also have adjusted EBITDA of £150m and adjusted EBITDA less Capex of £100m. The company is expected to deliver around £600m of operational synergies on a net present value basis, including integration costs, primarily attributable to cost savings (more than half of synergies are anticipated to be realised within 3 years of closing). This equates to a pre-tax annual run-rate of ~£70m by 2030.

The transaction will be structured through the contribution of an approximately £425m secured intercompany loan by VMO2 and approximately £835m of debt by Daisy Group. VMO2 is also set to raise additional financing at its cost of debt at closing, enabling the repayment of existing Daisy facilities through a second secured intercompany loan.

The transaction is expected to close in early H2 2025, subject to the usual regulatory approvals. VMO2 was advised on the deal by Jefferies, Deloitte, A&O Shearman, Simmons & Simmons and Ropes & Gray. For Daisy and its shareholders, Houlihan Lokey and EY are acting as financial advisers, PwC acting as tax advisers, and Paul Weiss, Clifford Chance and DWF as legal advisers.