EarthLink made a move this afternoon to streamline its business, selling off its IT division to Synoptek. The deal more than doubles Synoptek's size straight off the bat, bringing in 1,700 IT services customers to join their existing 400+ worldwide. It gives them a deeper network footprint, particularly on the east coast of the US, and adds a complementary data center footprint.
Synoptic itself saw new owners come in just two months ago, with Sverica Capital Management taking the reins. It's no accident that their arrival has been followed so closely by an acquisition that boosted their scale significantly.
Meanwhile, EarthLink will be continuing with the rest of its business, which is increasingly network focused. One has to speculate that there could other shoes to fall here soon. EarthLink's management did a great job in the eyes of the markets in cleaning up the company's business last year, but it's been clear that strategic alternatives have been a part of the plan for a while.
EarthLink's IT services division was generating $37M in annual revenue, which is only about 3% of the company's revenues. Some 210 EarthLink employees will be making the transition as well, which is about 10% of their headcount as given at the end of the third quarter of 2015.
The pricetag was $29M, subject to post closing contingencies. Bank Street and Troutman Sanders advised EarthLink on the financial and legal aspects of the transaction, respectively.