The current state of the market, described as soggy by some investment bankers, was the reason for London-based 2e2 pulling out of the IPO, said a spokesperson for the company. 2e2 conducts most of its business in the UK and the Netherlands, and had planned to raise cash to pay off its debt, which has been described as being in the order of 10m pounds ($18m). The IPO cash was also going to be used to fund future expansion.
However, the spokesperson said the float was never a necessity, adding that the company's bank, HSBC, is comfortable with the [debt] position. Moreover, 2e2's main external investor Gresham LLP, which has a 48.3% stake, supported the decision and said it is prepared to further fund the company.
Strong trading in the first half of 2004 was also listed as a reason for pulling out of the IPO, with the company highlighting a 1m pound ($1.8m) contract recently won by its Prime Business Solutions unit for providing network services to National Air Traffic Services. The company claims an annualized revenue run-rate (12 times its current monthly total) of 75m pounds ($132.4m).
Founded in March 2002, 2e2 has grown with the help of a series of acquisitions of small, managed services providers Norsk Data, Dynomic, Motifact, together with network infrastructure services provider Prime Business Solutions that it bought in April 2004. 2e2 said it does not integrate its acquisitions immediately, preferring to realize cost benefits over time and avoid cultural conflicts. Instead, it said it concentrates on exploiting cross-selling and up-selling opportunities.