The M&A landscape and maximising the value of your business

Transcription

1 The M&A landscape and maximising the value of your business Marcus Archer Partner Office tel: Mark Maunsell Associate Director Office tel:

2 Clearwater International: A leading pan-european mid-cap focused corporate finance boutique Our DNA Partner led and independent Experienced teams Sector focused International reach 15 offices globally Tailored approach (research driven) Deal originators Private equity heritage Entrepreneurial Our deals Mid cap Over 100 per year 20 to 250m enterprise value Over 5.0 billion of capital raised per annum Clients Private Equity Privately owned businesses Corporates Our services M&A Debt Advisory Special Situations CLEARWATER INTERNATIONAL JUNE 2017 Page 1

3 A selection of our facilities management credentials across Europe SIN & STES KAFEVEND HOLDINGS STAG SECURITY SERVICES CLARKSON SAFETY WATERFALL SERVICES Leading provider of cleaning services Clearwater International advised Prodef and Dosim on the disposal of Sin & Stes to Elior Fast growing workplace vending suppliers Clearwater International advised on the cross-border sale of the company to Eden Springs Leading security systems provider Clearwater International advised the company on its 13m sale to Servest UK French group specialising in full service fire detection and extinguishing businesses Clearwater International advised Clarkson on its cross border sale Contract catering company focussing on the education, care and welfare sectors Clearwater International advised the shareholders of Waterfall on the secondary buyout by LDC GENERALE DE PROTECTION ELIOR NETHERLANDS IMTECH NV UK SITEX ORBIS FLOOR CLEANING MACHINES Security and monitoring services provider Clearwater International advised TCR Capital and ICG on the disposal of Générale de Protection to Stanley Work Franch-based provider of contract catering services Clearwater International advised Elior on the disposal of its Dutch activity to Compass UK-based provider of technical services Clearwater International advised the shareholders of Imtech UK on its crossborder sale to EDF Energy Services Specialists in securing, maintaining and managing properties Clearwater International advised shareholders on the management buyout Leading technical maintenance business within the UK retail floor cleaning market Clearwater International advised the shareholders of Floor Cleaning Machines on its cross-border sale to Nilfisk SEGURIDAD LPM SL RESIDENTIAL MANAGEMENT GROUP PSL PURCHASING LIMITED EVANDER STROMA Spanish security systems and services company Clearwater International advised the company on raising funding to buy two companies dedicated to alarm systems Property-related services company Clearwater International advised on the sale of the company to Places for People Fresh food procurement services provider Clearwater International advised leading procurement provider PSL, on its sale to world leader in quality of life services, Sodexo Provider of 24/7 emergency response and repair for locks and glazing Clearwater International advised Evander s shareholders, LDC and Bridgepoint Development Capital on the sale to vacant property services specialist VPS Supplier of software services & applications to the energy and operational efficiency markets Clearwater International provided buyside financial advice for LDC s backing of the MBO of Stroma CLEARWATER INTERNATIONAL JUNE 2017 Page 2

4 A number of key themes emerge when reviewing the M&A data in the facilities management industry Mega-deals have slowed following a peak year in 2013 Leading players are focussing M&A efforts on fast growing emerging economies Convergence between real estate consultancies and facilities management companies Buyers are drawn to niche in-fill acquisitions with higher margins Leading corporates face both internal and market issues which is hampering appetite for acquisitions Cross-border activity remains robust with US and French buyers particularly attracted to the UK A selection of companies have listed on AIM and are implementing buy & build strategies Private Equity continues to be fairly selective about which opportunities to pursue High valuations in attractive sub-sectors CLEARWATER INTERNATIONAL JUNE 2017 Page 3

5 M&A continues to form a fundamental part of corporates growth strategy, however careful consideration must be given on how best to position a business for sale Why? Value Enhancers Value Drags Stagnant organic growth Strong balance sheet Synergies Diversify / broaden service matrix Eliminate competition Time lag to develop organically IP Geographic expansion Attractive niche High growth revenue and profitability Frameworks Technology Long term contracts with strong visibility of earnings High and stable margins A committed management team High contract retention levels Short-term regulatory / political uncertainty Over reliance on a couple of large contracts Downward pressure on margins Weak management team Key management figures looking to exit Lumpy project based revenue Customer churn CLEARWATER INTERNATIONAL JUNE 2017 Page 4

6 Facilities management companies have struggled in the face of austerity which was supposed to bring increased opportunity Share price movement since 2013 (%) Share price movement since 2013 (%) 80% Mite Group Plc Capita plc Serco plc 60% -37% 40% -43% 20% 0% -10% -20% -31% -40% -60% 27% -80% -100% -79% CLEARWATER INTERNATIONAL JUNE 2017 Page 5

7 This has led to companies restructuring operations which in turn is creating opportunities for M&A Dec-16 Rentokil exits European workwear business to Haniel - 520m The company supplies uniforms and other garments in 10 European markets, including Germany and the Benelux countries Jun-16 EQT acquired the Building & Facility segment of Bilfinger - 1.2bn The largest real estate services provider in the DACH region and a leading player in the UK through GVA Grimley Jan-15 ISS acquired GS Hall Plc s UK and European operations - 53m A technical services company focused on mechanical and electrical engineering, energy management and compliance Feb-14 Interserve Plc acquisition of Rentokil Initial Facilities Services - 250m Initial Facilities comprises the facilities services businesses of the Rentokil Initial Plc group, employing approximately 25,000 people in the UK, Ireland and Spain Aug-13 GDF Suez acquired Balfour Beatty s UK FM business - 190m Workplace provides facilities management services to hospitals, schools and local government establishments Jul-16 PHS sells Data Solutions business to Restore Plc m PHS Data Solutions is the second largest provider of document shredding services in the UK as well as having a significant records management business Sep-15 CBRE acquires the GWS business of Johnson Controls - 1.2bn GWS provides Integrated Facilities Management solutions for major occupiers of commercial real estate Jul-14 Cofely acquired the UK FM business of Lend Lease n/d LLFM currently provides a range of FM services across the UK and Ireland, with particular focus on healthcare, education, government and retail Sep-13 Hochtief sold its Service Solutions business to Spie SA - 250m A leading facilities and energy management business with sales of 700m and employing nearly 6,000 people Oct-13 Carillion acquired John Laing Integrated Services (JLIS) n/d Carillion has acquired infrastructure investment group John Laing s facilities management business CLEARWATER INTERNATIONAL JUNE 2017 Page 6

8 A broad buyer landscape with a number of new entrants that are looking to extend their reach through M&A GEOGRAPHICAL. CAPABILITY VERTICALS CREDIBILITY CLIENTS SCALE Soft Facilities Management Hard Facilities Management Housing Associations Specialist CLEARWATER INTERNATIONAL JUNE 2017 Page 7

9 A diverse mix of both international and domestic buyers, led by Restore Plc which has been the most acquisitive corporate in the UK in the last 3 years Company Name Country Ownership Turnover Area Date Target Details ABM Industries Inc USA Listed 4,127m Restore Plc UK Listed 129m Servest Marlowe Plc South Africa Private 284m (UK) Soft FM Solutions Data centre cleaning services Hard FM 2016 Westway Services A provider of technical facility services and engineering Soft FM 2014 GBM Support Services Cleaning, security, building maintenance and waste services Soft FM 2017 The ITAD Works Limited IT asset recovery and recycling services Soft FM 2017 Reisswolf London Secure shredding business Soft FM 2016 PHS Data Solutions Paper shredding and storage Soft FM 2015 Wincanton Records Management Document and data storage, archiving, and destruction services Soft FM 2015 The Data Imaging & archiving Co Document management services Soft FM 2015 ITP Group Holdings Limited UK's leading collector of empty printing cartridges Soft FM 2017 PRO-CHECK Northern Ltd Pest control specialist Soft FM 2016 Catering Academy A contract catering company that work in education and business Hard FM 2016 Arthur Mckay & Co Ltd Mechanical and electrical services Soft FM 2016 Accuro Catering A national contract catering company Hard FM 2015 Llewellyn Smith Ltd Energy compliance / management Hard FM 2017 Advance Environmental Ltd Provider of water treatment and hygiene services Hard FM 2017 Alpha Peerless Fire Systems Ltd Fire protection services provider UK Listed 17.6 Hard FM 2017 BBC Fire Protection Ltd Fire protection services to more than 700 customers Bilby Plc UK Listed 50.0 Hard FM 2016 Titan Fire & Security Ltd Fire protection services based in Uxbridge Hard FM 2016 Hentland Ltd Fire protection and security services Hard FM 2016 Spokemead Maintenance Ltd Electrical installation, repairs and maintenance Hard FM 2016 DCB (Kent) Limited Refurbishment and maintenance services to housing associations Hard FM 2015 Purdy Contracts Ltd A gas and electrical contractor CLEARWATER INTERNATIONAL JUNE 2017 Page 8

10 Increasing levels of cross-border M&A activity as leading UK headquartered facilities management companies focus on organic growth Deals by geography (UK Target) Deals by geography (UK Target) Last Twelve Months 5% 5% 3% 9% 18% 8% 37 Deals 3% 45 Deals 2% 2% 5% 76% 64% France Germany South Africa Switzerland United Kingdom USA France Germany India South Africa United Kingdom USA CLEARWATER INTERNATIONAL JUNE 2017 Page 9

11 Cross-border M&A activity in the facilities management sector continues to be dominated by French headquartered buyers GDF Suez acquires Balfour Beatty Workplace Ltd Workplace provides facilities management services to hospitals, schools and local government establishments Elior acquires Lexington Catering Limited Lexington provides contract catering to corporates primarily in the financial services sector Spie S.A acquires Scotshield Fire and Security A provider of fire detection, security alarms and access control installation maintenance services Spie S.A acquires Leven Energy Services Limited Leven is utilities contractor supporting Distribution Network Operators ID Verde SAS acquires The Landscape Group Limited UK-based landscaping and grounds maintenance company VINCI acquires Powell Engineering Ltd A UK based electrical engineering specialist SPIE acquires Environmental Engineering (UK) Limited HVAC, M&E engineering services within the food and beverage industry SPIE acquires Triosgroup Ltd Triosgroup provides facility and property related technical services Elis S.A. acquires Berendsen Plc A company engaged in the laundering and maintenance of textiles EDF Energy Services acquires Imtech Group A leading engineering services company and provider of technical services to construction, industrial and public sector clients in the UK and Ireland Sodexo acquires Peyton and Byrne Ltd (catering contracts) The public catering contracts business of P&B Sodexo acquires PSL Ltd A food procurement specialist Elior acquires Waterfall Services Ltd A education focussed contract catering company Samsic Group acquires JPC Cleaning Services Ltd A provider of cleaning solutions in and around London ID Verde SAS acquires Quadron Services Limited A grounds maintenance company engaged in providing services to LA s CLEARWATER INTERNATIONAL JUNE 2017 Page 10

12 % Movement Recently listed large-cap facilities management companies have performed well, however small-cap stocks continue to be more volatile Large-cap Small-cap 140% Spie SAS Elior Group ISS A/S Aramark 600% Bilby plc Marlowe Plc 120% 500% 100% 400% 80% 60% 300% 40% 200% 20% 100% 0% -20% 0% -40% -100% Data as at 15 th June 2017 CLEARWATER INTERNATIONAL JUNE 2017 Page 11

13 Private equity activity in the sector has ramped up and now plays a fundamental role in driving M&A 2013 UK Target M&A Last Twelve Months UK Target M&A Deal s 8% 45 Deal s 37 18% 3 92% 8 82% Private Equity Strategic Buyers Private Equity Strategic Buyers CLEARWATER INTERNATIONAL JUNE 2017 Page 12

14 Private equity is interested in deploying capital in the facilities management sector, however a number of failures continue to make them approach with caution Pros and Cons Private Equity Investments Private equity funds offer a credible alternative to a trade sale An overhang of funds in conjunction with buoyant debt markets allows private equity funds to be extremely competitive when it comes to valuation 37 Deals can be structured with follow-on capital for further Deal acquisitions s Financial investors can provide flexibility in structuring a deal to accommodate various shareholders Investors are able to add value through a long track record of investments, often in the sector Private equity funds are motivated by the return on investment Selling equity to a third party means relinquishing control of the business A number of historical failures in the sector reduce appetite Modest trade appetite for M&A makes it more difficult for a private equity investor to exit. 20m 20m- 50m 50m- 200m m 45 Deal s CLEARWATER INTERNATIONAL JUNE 2017 Page 13

15 Businesses of scale, achieving strong growth and that are often underpinned by technology continue to achieve the highest multiples Soft FM Hard FM Technology 78m 70m 8.8x 52m 9.5x 2,170m 7.6x 22m 6.3x 53m 7.1x 8m 6.6x 50m 10.0x 60m 7.1x 11m 6.0x 13m 6.5x 4m 6.1x 11.2x 16m 9.5x Enterprise Value xxx Source: Mergermarket and CWI Intelligence CLEARWATER INTERNATIONAL JUNE 2017 Page 14

16 In summary the UK is a mature, stable, but competitive market, with a growing number of deals due to international acquirers targeting the UK M&A deal levels will remain robust with a continued focus on lower-mid market transactions FM companies will increasingly look to either partner with or acquire technology to innovate and deliver new value propositions International acquirers will continue to be drawn to the mature and stable UK market, aided by a favourable exchange rate Non-core disposals will drive the larger deals in the sector A high level of private equity investments in 13/14 will result in a number of businesses coming to market over the coming 12 months Private equity will be drawn to tech-enabled or differentiated propositions EBITDA multiples will remain at similar levels, driven by buoyant debt markets and strong balance sheets CLEARWATER INTERNATIONAL JUNE 2017 Page 15

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