Gamma Takes Fight to Vodafone and Deutsche Telekom with £165m Acquisition

Gamma continues its expansion in Germany through the €196m acquisition of STARFACE. 

Founded in 2010, STARFACE provides business communication and collaboration technology to small and medium-sized enterprises, as well as to the public sector and larger businesses through its partner programme. Founder and CEO Florian Buzin will continue to lead the business under Gamma’s ownership. 

Buzin said: “We are thrilled to join forces with Gamma, a company that shares our vision of empowering SMEs with cutting-edge communication solutions. This partnership builds on STARFACE’s legacy of innovation and channel excellence while unlocking new opportunities for growth and collaboration. 

“Together, we are in an excellent position to lead the next chapter of cloud communications in Germany and beyond.” 

What this Means for the Market 

Gamma’s acquisition of STARFACE marks a strategic move into the German cloud communications market, one of Western Europe’s most under-penetrated regions despite its vast potential. 

Germany boasts a market of 25 million potential cloud communications users, yet only 4.75 million have made the leap to the cloud. With a penetration rate of just 19.1%, according to Cavell’s latest Cloud Comms Market research, Germany lags significantly behind its European counterparts. 

Interestingly, adoption is strongest among micro-businesses, where penetration has reached 25%. These smaller companies have embraced the cloud more quickly, supported by a wave of German service providers specifically targeting their needs. However, the real opportunity lies in the “Mittelstand”, Germany’s mid-market segment.  

This group relies heavily on on-premise or hybrid communication systems, blending traditional infrastructure with emerging cloud-based services like meetings and messaging. While hybrid models are gaining momentum, full adoption of public cloud solutions has been slower. 

Encouragingly, conversations with German providers and IT buyers reveal a growing appetite for cloud adoption. Many mid-sized businesses are now exploring the benefits of cloud communications, signalling that the pace of adoption may soon accelerate. 

STARFACE joins Gamma with a solid customer base for its on-premises product, meaning it can service both cloud and on-prem customers, with a huge opportunity to migrate these clients to the cloud. Adding STARFACE’s channel model to the digital-first strategy that arrived with Placetel last year positions Gamma well to attack the SME market in Germany. 

Gamma’s Germany Journey 

Gamma entered Germany through its acquisition of HFO in 2020 and followed up with the acquisition of PBX provider Placetel last year. The firm has ambitious plans to take on incumbent leaders Deutsche Telekom and Vodafone Germany. 

Andrew Belshaw, CEO at Gamma, said: “This acquisition marks a significant milestone for Gamma as we further strengthen our position in Europe’s cloud communications market. 

“By combining STARFACE’s strong partner ecosystem and technical expertise with Gamma’s established connectivity capabilities, we’re delivering unmatched value to our customers and partners. Together, we’re not only strengthening our position in the German market but also shaping the future of business communications for SMEs across Europe.” 

Gamma will fund the acquisition through around £125m of existing cash, with the remaining £40m coming via a £130m revolving credit facility. 

The Numbers Behind the Deal 

STARFACE expects 2024 revenue to come in at €44m, with adjusted EBITDA of around €15m. 

Gamma said it expects to invest more capital in STARFACE in 2025. This includes costs for integrating operations and speeding up the shift from one-time license sales to a subscription-based SaaS model. 

In 2024, about 70% of Gamma’s revenue came from recurring sources. The acquisition is expected to increase Adjusted EPS in 2025. Gamma plans to include provisional accounting for the acquisition in its first-half 2025 results, depending on when the deal is finalised. 

Gamma said the deal bolsters its cloud PBX seats in Germany by 210,000, taking it to more than 500,000 in the country – roughly half the number in the UK. STARFACE also brings with it 2,000 channel partners. 

Dom Black, Principal Analyst at Cavell, said: “In Germany, Gamma now has a significant base of Cloud PBX users and channel partners, and direct online sales motions (from Placetel) with a large installed legacy base to migrate over time. 

“The strategy to focus on the biggest core markets and expand their footprint there is paying off and have put in place a very established core of products, route to market and team to execute.” 

Trading Update 

Gamma also published a trading update in a separate filing with the stock exchange. 

The firm said its financial performance aligns with market expectations, demonstrating “healthy year-on-year growth” for the year ending 31 December 2024. Key customer wins in the period included Morrisons Supermarkets, Equiniti and Quilter, and Dorset NHS and Westminster City Council. 

Gamma is also pressing ahead with plans to move to the main market in London and will provide an update when it releases its 2024 numbers in March. 

Belshaw added: “I am pleased with the results we have achieved in 2024. We have strengthened key relationships with our technology partners by helping them bring their products into our market, and with our channel partners, by providing them with an expanded range of products to sell to their SME customers. 

“I would like to thank our team for all of their hard work and commitment throughout the year and look forward to updating shareholders in more detail on all of the progress we’ve made in our full-year report in March.”