Continuing the consolidation trend in the competitive service provider segment, Netifice Communications and MegaPath Networks today announced that they are merging to form one company with $125 million in revenue in managed services.

The companies provide virtual private network and other managed IP services to the business community.

According to a statement from the two companies, Netifice will acquire MegaPath for an undisclosed amount in stock and cash. In addition, existing investors of both companies are producing $35 million in new investment to enable the deal. The new company will have greater scale and scope and a more robust set of IP-based services including VPNs, integrated security and remote access, the two companies said.

"This is an important next step in our strategy to grow the business through organic sales, product expansion and acquisitions," said Craig Young, chairman and CEO of Netifice, in a prepared statement. "As a leading provider of managed IP data, voice and security services, Netifice is now in a powerful position to leverage the size and scale this combination provides, and our solid financial foundation allows us to further expand our market leadership. This merger brings together two highly competitive managed IP service companies with a shared strategic vision and a passion to serve our customers."

The new funding comes from Netifice investors including Boston Millennia Partners, Columbia Capital, Dolphin Equity Partners, Fidelity Ventures, H.I.G. Capital and Rho Ventures. Existing MegaPath investors participating in the arrangement include Comcast Interactive Capital, Performance Equity Management, Trident Capital and U.S. Venture Partners.