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Sky News has learnt that Daisy Group, which was founded and is chaired by Matthew Riley, will announce the acquisition of XLN before the end of the week.
By adding XLN's 120,000 small business customers, to which it supplies business broadband, phones and card payment services, it will make Daisy second only to BT Group in the UK's SME telecoms market.
A source close to the deal said that it would create around 200 jobs, and expand Daisy's customer base in the small and medium business (SMB) sector to over 200,000.
Mr Riley has sought to grow Daisy by positioning it at the heart of the transition to digital telecoms services in order to access greater speed, reliability and security.
XLN was founded by Christian Nellemann in 2002 in a bid to improve the communication services available to small independent companies such as hairdressers and opticians.
Mr Nellemnann, who owned about 80pc of XLN with his father, are likely to land a windfall of close to £90m from the sale of the company, which is carrying approximately £100m of debt.
In 2019, Sky News reported that he had hired advisers to pursue a sale of the company, although a deal has taken almost three years to consummate.
Daisy, whose founder has become one of Britain's wealthiest self-made people, was at one stage listed on the public market in London before being taken private again in 2014 with the backing of Toscafund Asset Management.
Mr Riley has built the company through a string of acquisitions, including the £165m takeover of Alternative Networks.
After leaving school at the age of 16, Mr Riley began working life by fixing fax machines, before going on to establish a recruitment business.
Lancashire-based Daisy manages mobile, cloud and other services for business customers, and describes itself as the UK's largest independent provider in the sector.
Last year, Mr Riley secured another coup by selling a minority stake in Daisy's Digital Wholesale Solutions arm to the private equity firm Inflexion in a deal valuing it at £1bn.
Daisy declined to comment on its purchase of XLN.