Celerity Buys Chilli IT To Expand Its Power Systems Business
June 24, 2024 Timothy Prickett Morgan
Like so many companies that have been part of the AS/400 ecosystem, both Celerity and Chilli IT are relatively small firms with long histories in peddling Power-based systems from IBM and who expanded into providing managed services over the years. Celerity and Chilli IT are also similar in another way in that both are based in the United Kingdom and largely serve customers in the British Isles.
Now, they are one company in the wake of a partnership that the two companies formed back in February that turned into an outright acquisition a few weeks ago, with Celerity buying Chilli IT and adding its team and its book of business to its own.
For those of you who are outside of Britain, Scotland, and Ireland, Celerity and Chilli IT might be unfamiliar to you, but relatively small IBM business partners with broad and deep expertise in the IBM i platform and Power Systems iron is something that most of you are acquainted with. Such mergers and acquisitions as the one between Celerity and Chilli IT are becoming more and more common, in fact, as business partners look to expanded their managed services offerings as IBM i shops run into skills shortages and budget constraints but still have to get things done to modernize their applications and make them more resilient.
Celerity was founded in September 2002 by Chris Roche, who was the company’s managing director and who was promoted to its chief executive officer in January 2018. In 2008, Celerity had grown to 10 employees in size, and apparently all of these original employees are still working at the company today.
Making acquisitions is not something that most IBM i business partners can easily swing, and that is why in 2011, in the wake of the Great Recession, the financial powerhouses in the United Kingdom – Barclays, HSBC, Lloyds Banking Group, NatWest, and Standard Chartered – kicked in £2.5 billion to create the BGF Group, a private equity firm created explicitly to make strategic investments in small and medium businesses. Eventually, the Ireland Strategic Investment Fund, AIB, Bank of Ireland, and Ulster Bank created another arm of BGF Group to do similar investments in Ireland. Speaking very generally, BGF invests somewhere between £1 million and £20 million in companies and aims to have an equity stake of between 10 percent and 40 percent. This means majority shareholders can get investments and still maintain control of their companies. (Well, more so than if they sold the company outright or sold off more than a 50 percent share, anyway.)
To date, BGF has invested over £4 billion in more than 600 companies in the UK and Ireland, has provided more than £1 billion in follow-on funding, and has completed more than 200 exits (presumably at a profit for itself).
BGF is important to the Celerity-Chilli IT story because in November 2021 the private equity firm kicked in £15 million to Celerity, and that investment was part of more than £100 million in equity investments done that year. In the prior decade of investments, comprising £538 million in the tech sector alone, 70 percent of the money was deployed outside of the southeast of England, which includes London.
This is significant, since Celerity is based in Preston, north of the manufacturing center of Manchester and Chilli IT is based in Chester, which is halfway between Manchester and Liverpool. These are all far from London in places that have lots of OS/400 and IBM i platform users in all kinds of businesses, just like many OS/400 and IBM i shops are located outside of New York, Los Angeles, or Chicago.
We talked to Richard Warren, managing director at Chilli IT, and Stan Wilkens, technical director at the company, two years ago as part of our In The IBM i Trenches series, both of whom are co-founders of Chilli IT. The company had 20 employees at the time and was looking to expand its reach. With the acquisition of Chilli IT, Celerity says that it now has 95 employees and a combined turnover – that’s British for annual revenue – of £40 million, and all of the employees at Chilli IT have been retained. The Chilli IT brand is going to be maintained.
The financial details of the Chilli IT acquisition were not divulged, but Celerity did say that that this was the first acquisition it was doing after sitting on the BGF money for the part three years and that it was looking to do more deals.
