Sky News has learnt that Matthew Riley is on the brink of a deal to combine Daisy's Corporate Service Business with Wavenet, which has been backed by Macquarie Capital Principal Finance since 2021.

It will involve the Daisy arm being demerged from the group and absorbed into Wavenet.

City sources said the deal, which will create a company with a valuation of over £1bn, could be announced as soon as this week.

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The combined group, which will be called Wavenet, will create a managed services provider with more than 20,000 UK enterprise customers, including Costain, the NHS and Transport for London.

Sources said the deal was being backed by both Macquarie, which will remain the largest individual shareholder, and debt financing from Ares.

With more than 2,000 employees after the tie-up completes, Wavenet will be the largest independent provider of its kind in Britain at a time of growing demand for IT and cybersecurity services.

The deal will be the second £1bn-plus transaction struck by Mr Riley, Daisy's founder and executive chairman, who has also in recent weeks cemented a £215m takeover of cloud communications provider 4Com.

Wavenet will continue to be led by executive chairman Bill Dawson, while Mr Riley will join the company's board as a non-executive director.

Responding to an enquiry from Sky News, Philip Grannum, Wavenet chief executive, said: "This deal brings together two prolific consolidators, making Wavenet the largest independent Managed Service & Security Provider for large SME & corporate customers.

"It provides both Daisy and Wavenet customers greater access to enterprise grade solutions combined with the very best customer service and gives fantastic career opportunities for our employees."

Bankers at Houlihan Lokey are advising on the deal.

Mr Riley has become a key dealmaker in the sector, buying rivals such as XLN Telecom for £210m in 2022.

Its growth has made Daisy second only to BT Group in the UK's SME telecoms market.

At one stage listed on the public market in London, Daisy was taken private again in 2014 with the backing of Toscafund Asset Management.

Mr Riley could not be reached for comment on Tuesday, while Macquarie declined to comment.