Sangoma Closes the Gap on Rivals With $437M Star2Star Buy

Sangoma buys Florida startup Star2Star for  $437 millionOpens a new window to shore up its position in the cloud communication ecosystem. A senior analyst from 451 Research says this could probably be troublesome news for RingCentral and Vonage.

A lot has happened in the cloud communication space since the global outbreak struck, forcing businesses to go remote. Amid this massive disruption, the world became more tightly knit and connected, thanks to the seamless video conferencing and collaboration solutions. Besides the old guard (Cisco and Microsoft) that rushed to find its edge with revamped collaboration suites — shiny, well-funded startups also emerged to seek a niche in this evolving landscape.

In order to catch-up with Silicon Valley software giants, Sangoma, the Canadian provider of VoIP hardware and software components both for on-premise and the cloud, announced an agreement to acquire Star2Star, a Florida-based cloud communication company. The acquisition, valued at $437 millionOpens a new window , will enable Sangoma to cement itself as one of the leading providers of communications-as-a-service (CaaS) market. The deal will also position  Sangoma in the “upper echelon of the industry’s leading companies.”

The company knows it needs a mix of hardware and software solutions to help it stand out in what is becoming an increasingly competitive space. And the potential of the merger is undoubtedly huge.

Through the acquisition, Sangoma will add key capabilities across voice, contact center, collaboration, integration, video meetings, communications platform-as-a-service (CPaaS), and desktop as a service (DaaS) to its portfolio. The company will also leverage Star2Star’s thriving partner ecosystem of 650 firms, including resellers, interconnects, managed services providers, enterprise technology partners, and wholesale and white label distributors.

According to Bill WignallOpens a new window , President and CEO of Sangoma, “For many years, we have consciously pursued a strategy to transform Sangoma from a product business to one of the communications industry’s leading SaaS companies.”

“This transaction ensures we can meet any customer’s preference, be it for purely cloud solutions, or for on-premise deployments, or a hybrid combination, all the way from small businesses to large enterprises.”

See Also: Why RingCentral Is Ahead of the Pack in the UCaaS Market

Pursuing Growth Strategy Through Strategic Acquisitions

Sangoma’s previous acquisitions were also in line with its SaaS transformation strategy. In 2018, the company acquired DigiumOpens a new window , and a year later, it grabbed Pittsburgh-based SIP trunking provider VoIP InnovationsOpens a new window to plot its route to success.

Raul Castanon, a senior research analyst with 451 Research, part of S&P Global Market Intelligence, told Channel PartnersOpens a new window the acquisition would help “Sangoma reposition as a leading global cloud communications provider, alongside key competitors 8×8, RingCentral and Vonage. A key challenge will be bringing these assets together into a comprehensive, integrated cloud communications portfolio. However, experience shows that Sangoma has been skillful integrating past acquisitions.”

According to Castanon, the move would allow Sangoma to muscle in on RingCentral and Vonage’s turf. For RingCentral, the channel partnerships are a centerpiece of its business strategy, allowing it to deliver innovations to the market. UCaaS vendors know that in a maturing cloud collaboration ecosystem, the channel partners can help vendors extend their reach, deliver solutions quickly to the marketplace and add value to the brand.

Star2Star President and Chief Revenue Officer Michelle Accardi told Business ObserverOpens a new window that the deal is a “marriage made in heaven.” And with good reason. Sangoma has been on a strong path to growth. As the novel coronavirus gripped global businesses, Sangoma’s shares surged by 43%. This deal will position Sangoma to become a powerful competitor in the UCaaS industry.

Norman WorthingtonOpens a new window , CEO of Star2Star, who founded the company in 2005 will join the board post the acquisition.

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