At first glance, the agreed £1.1bn buyout of Gamma Communications (LON:GAMA) by private equity firm Epiris may look like a victory for shareholders. Epiris is offering £11.20 a share, a ~50% premium to Gamma’s 700p-750p price when talks first emerged earlier this year.
The problem is that the ‘premium’ is largely a premium to a depressed market valuation. Gamma’s shares reached £23.50 in 2021 and traded around £17 as recently as 2024. Several analysts were still valuing the shares in the £14-£16 earlier in 2026.
Gamma Communications investor relations
| Gamma Communications (LON:GAMA) | Price: £11.46 (+0.5%) | Market cap: £1.02bn |
The offer is therefore only about 48% of Gamma’s 2021 peak.
That makes the deal look very much like an opportunistic PE buyer acquiring a temporarily unloved quality business at a huge discount, and arguably just as prospects are beginning to improve.
Presumably, the Gamma board have reached out to institutional investors, and their feedback has been supportive of the deal. But, if that’s the case, it’s arguably another example of inherent short-termism that pervades the UK institutional stock market investment industry.
That is not something UK retail investors should necessarily celebrate and it echoes of the myopia that saw chip design firm ARM Holdings (NASDAQ:ARM) depart the UK market a decade ago. It was sold for £24 billion (~$32 billion) in 2016, an approximate 40% ‘premium’ then. ARM is listed again today on Nasdaq. The market cap now is around $258bn.
That’s an 8-fold increase in 10 years.
The same institutions that backed the sale are probably feeling quite sheepish today.
A long-term growth compounder
So, why would Gamma be worth backing for the long-term?
First, it is much more than a traditional telecoms company. It provides business communications technology spanning cloud communications, voice, messaging, connectivity, contact centres and unified communications. It combines its own technology and network with platforms, such as Microsoft Teams and Cisco.
Its competitive advantage is built around technology, infrastructure, recurring revenues and deep relationships with business customers and channel partners.
The long-term numbers demonstrate the quality of the business.
| £m unless stated | 2018 | 2021 | 2024 | 2025 |
| Revenue | 285 | 448 | 579 | 646 |
| Adjusted EPS | 30.3p | 55.2p | 85.1p | 94.5p |
| Operating cash generation | ~£41— | ~£79 | ~£120 | ~132 |
| Dividend/share | 10.5p | 13.2p | 19.5p | 22.2p |
| ROCE | ~16.3% | 23.1% | 27.4% | 27.8% |
*Data from Gamma Communications, Stockopedia, Morningstar and other sources. Gamma uses ‘Alternative Performance Measures’ which may differ from reported numbers (details available in the Annual Report).
Between 2018 and 2025, revenue more than doubled, adjusted EPS almost trebled, while cashflows and ROCE have improved (albeit, with bumps in the road). All the while, dividends have doubled.
That is the sort of compounding profile that UK investors should want to retain access to.
The recent slowdown has obscured the opportunity
Gamma has experienced a difficult period, particularly in its UK SME market, while acquisitions and investment have increased costs.
But the underlying business has continued to grow.
In 2025, revenue rose 11% to £645.8m, gross profit increased 16% to £348.2m and adjusted EBITDA rose 13% to £141.7m. Adjusted EPS increased 11% to 94.5p and adjusted operating cash generation rose 9% to £131.8m.
Importantly, gross margin increased from 52% to 54%, demonstrating continued operating leverage.
Gamma also generates substantial recurring revenue, with around 89% of revenue recurring, while adjusted cash conversion was approximately 93%.
The market had become focused on slower growth and acquisition-related costs. But the ingredients for a renewed growth phase were becoming increasingly visible.
Germany could be the next growth engine
One of the most important opportunities is Germany.
Gamma has invested heavily in the market, including the acquisitions of Placetel and Starface. German businesses remain behind the UK in adopting cloud communications, giving Gamma an opportunity to migrate customers towards modern communications infrastructure.
The company is also targeting larger enterprise customers and expanding its international Service Provider business, which provides numbering, voice and SMS capabilities across numerous countries.
These businesses potentially give Gamma several avenues for growth beyond its traditional UK SME franchise.
AI adds another potential growth opportunity.
Rather than simply threatening traditional communications services, AI could increase demand for intelligent contact centres, automated customer interactions, voice technology and integrated business communications. Gamma’s position between global technology platforms and local businesses could give it a useful role in this transition.
Why the quality metrics matter
Gamma’s investment case has never depended solely on rapid revenue growth.
Its attraction is the combination of growth, margins, cash generation and high returns on capital.
ROCE reached 27.8% in 2025, while ROE has generally been in the high-teens or around 20%. Gross margin has increased substantially over the long term, and cash conversion remains strong.
These are important indicators of a quality business.
A company that can consistently generate returns on capital well above its cost of capital can reinvest profits into organic expansion and acquisitions while still generating cash for shareholders.
That is precisely what makes Gamma attractive to private equity.
Why Epiris wants it
The takeover announcement effectively describes the investment case UK shareholders have been buying for years.
Epiris highlights Gamma’s proprietary technology, telecoms network, leading UK and German positions, strong customer relationships, profitable growth and cash generation.
It also sees significant opportunities from increased investment, innovation and AI adoption.
That raises an uncomfortable question for public investors:
If private equity believes Gamma can create substantially more value by investing for the next phase of growth, why should public shareholders have to sell just before that opportunity matures?
The answer is that the board believes the offer provides attractive and certain value compared with the risks of remaining independent.
For shareholders today, that may be sensible, depending on your view.
For Britain’s capital markets, it is another warning sign.
Gamma is not an isolated case
Gamma joins a growing list of successful British-listed companies acquired by overseas buyers or private equity.
| Company | Buyer |
| Gamma Communications | Epiris |
| Darktrace | Thoma Bravo |
| Aveva | Schneider Electric |
| Avast | NortonLifeLock |
| Hargreaves Lansdown | CVC-led consortium |
| DS Smith | International Paper |
| Keywords Studios | EQT |
| Sophos | Thoma Bravo |
| Inmarsat | Viasat-led consortium |
| Morrison | CD&R |
The pattern matters.
Britain’s public markets are losing established, high-quality companies while struggling to attract enough new listings to replace them.
For retail investors, that means fewer opportunities to own companies capable of compounding earnings and cash flows over decades.
Bull case vs bear case
Bull case
- German cloud communications adoption accelerates.
- Enterprise growth strengthens.
- AI creates new demand for communications technology.
- Service Provider becomes a larger international business.
- Recurring revenues support predictable cash generation.
- High ROCE allows continued profitable reinvestment.
Bear case
- Growth remains stuck at low single digits.
- Competition puts pressure on margins.
- AI disrupts traditional communications faster than new products compensate.
- German acquisitions disappoint.
- Enterprise demand remains weak.
- Higher leverage limits investment flexibility.
Investor verdict
Existing Gamma shareholders might welcome the certainty of £11.20 a share in case.
But the bigger story is much less positive.
The offer is around half Gamma’s 2021 market valuation, despite the business being considerably larger today and still generating strong margins, cash flows and returns on capital.
More importantly, the takeover comes just as several potential growth drivers — Germany, enterprise communications, Service Provider expansion and AI — are beginning to become more significant.
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That makes the deal look opportunistic.
Epiris gets ownership of Gamma’s next growth phase. UK investors lose another high-quality growth option.
For a stock market already struggling with weak valuations, limited new listings and a steady stream of takeovers, Gamma’s departure is another reminder of one of London’s biggest problems: Britain is increasingly becoming a market where investors fund quality companies’ initial growth, only for private equity or overseas buyers to acquire them when their long-term potential becomes clearer.
That is not something UK retail investors should necessarily celebrate.
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