Iron Mountain Opens M&A 'Pipeline'

Iron Mountain, which announced its Q1 results this morning, is continuing on its M&A tear, buying records management vendor ArchivesOne for an undisclosed fee and planning more buys in the coming months. (See Iron Mountain Reports Q1.)

Middlebury, Conn.-based ArchivesOne provides a range of archiving services, including online backup and document destruction. It operates 31 facilities in 10 states.

While Iron Mountain removed the pricetag before showing off its latest, ArchivesOne raised $20 million in debt financing in November, bringing the firm's total funding to $120 million.

The deal is the latest in a string of acquisitions by Iron Mountain. In late 2005, for example, the vendor spent $50 million on online backup specialist LiveVault, which now forms the basis of the vendor's own online offerings. (See Iron Mountain Lands LiveVault and Iron Mountain to Buy LiveVault.)

Other acquisitions include data protection specialist DigiGuard, the Australian and New Zealand operations of service provider Pickfords Records Management, and two Indian services firms. (See Suppliers Snap Up Services, Iron Mountain Buys Aussie SP, Iron Mountain Expands , and Iron Mountain Expands Into India.) In the last few months, the vendor has also picked up Italian records management firm Italiana Archivi and German document management vendor (and Scrabble player's dream) Gesellschaft fur beleglose Dokumentenbearbeitung (GbD).Speaking on a conference call this morning, Jeff Lawrence, Iron Mountain's senior vice president, explained how the firm has been reorganizing its financial operations to support future M&A, setting up a global treasury program to reduce foreign exchange risk and drive cash savings. "We want to recharge our liquidity position given our robust acquisition pipeline," he said.

CEO Richard Reese also promised more M&A in 2007. "There's more acquisition activity [from Iron Mountain] in size and scale than we have seen in the last few years," he said, adding that cost of doing business in this space is forcing many smaller firms to sell up.

Reese cited Iron Mountain's "acquisition appetite" in the digital space -- marking a departure from the company's truck-and-warehouse archiving model, which been something of a sore point for the company PR-wise. (See Iron Mountain Marches On.)

The exec did not reveal which companies Iron Mountain is eyeing, although he confirmed that future M&A is unlikely to be on the scale of ArchivesOne, which operates 31 facilities in 10 states. "You will see maybe a reasonable number of smaller transactions for the year," he said, adding that ArchivesOne's 390 employees are expected to join Iron Mountain.

Cash is unlikely to be an issue for the vendor. Iron Mountain's quarterly revenue was $633 million, up 12 percent on the same period last year and above analyst estimates of $627.42 million.Iron Mountain's earnings per share were 17 cents on net income of $35 million, up from $27 million and 14 cents per share in the year-ago quarter. Notably, this quarter's results include $9 million of insurance recovery services related to the firm's London warehouse fire last year. (See Iron Mountain Feels the Heat, Iron Mountain in Hot Water Again, Smoke Clears for Iron Mountain, and Iron Mountain Hosts Analyst Day.) Analysts had estimated earnings of 15 cents.

The vendor is also planning more enhancements to its recently upgraded email archiving service, according to Reese. (See Iron Mountain Makes Email Move, Iron Mountain Scales Email , and Email Gets More Outsourced Options.) "The next space coming online is the corporate email market. Our product is not as fine-tuned for that as I would like it to be, but we are investing in that," he said.

Iron Mountain confirmed that the digital side of its business grew 20 percent year over year, boosted largely by compliance demands from the likes of the SEC.

The CEO also confirmed that the online backup market is getting busier. "There have been more people coming into the backup space," he said.

The exec had a frosty response for one analyst who suggested that Berkeley Data Systems, which recently caused a stir by grabbing a major contract with General Electric, may have won the GE deal at Iron Mountain's expense. (See Berkeley Data Signs GE.) "GE is a big company and we're still doing a lot of back up for them," he shot back.Buoyed by its M&A tear, Iron Mountain also raised its annual revenue guidance today, from between $2.35 and $2.6 billion, to a range between $2.6 and $2.66 billion.

In trading today, shares of Iron Mountain rose 86 cents (3.09 percent) to $28.71.

James Rogers, Senior Editor Byte and Switch