InsightsNewsletterRenatus’ Private Equity M&A Newsletter – 02/06/2024

Renatus’ Private Equity M&A Newsletter – 02/06/2024

Thought for the Week

At the start of the year, we issued a view on the key imminent elections in Ireland, the US and the UK and thought it would be interesting to check in again to see how the betting markets have moved in the interim. Implied probabilities of various outcomes are published below:

Ireland:

When will the next election take place?

  • 2025 – 47.5% vs 55% at the start of the year (odds of 10/11)
  • 2024 – 52.5% vs 45% at the start of the year (odds of 8/11)

Who will have the most seats after the next election?

  • Sinn Féin – 68% vs 80% at the start of the year (odds of 3/10)
  • Fine Gael –18% vs 11% at the start of the year (odds of 4/1)
  • Fianna Fáil – 11% vs 8% at the start of the year (odds of 7/1)
  • Other 3%

UK:

Who will have more seats after the next election to be held on 4th July ?

  • Labour – 93% vs 84% start of the year) (odds of 1/80)
  • Conservative – 6% vs 14% at the start of the year (odds of 16/1)
  • Other – 1%

USA:

Who will become the next US president after the 2024 general election?

  • Donald Trump – 50% vs 43% at the start of the year (odds of 4/5)
  • Joe Biden – 38% vs 31% at the start of the year (odds of 11/8)
  • Michelle Obama – 4% (odds of 25/1)
  • Others 8%

Source: Paddy Power as of Sunday 2nd June

Our Portfolio Companies Are Hiring

WH Scott Group is recruiting a Chief Financial Officer. WH Scott Group is a market leader in the UK & Ireland in the design, fabrication, supply, inspection and maintenance of equipment used in regulated, highly technical lifting and industrial markets. It is undergoing a period of rapid expansion both organically and through acquisition. This role will involve managing financial performance, leading value-add initiatives as well as executing and integrating acquisition opportunities. 

Irish Rollforming is recruiting a Finance Director. Irish Rollforming was first established in 2010 by Liam O’Sullivan as a single sheet cladding manufacturer and is evolving to become a leader in the production of highly accredited insulated panelling. The Finance Director will drive reporting, analysis and strategic alignment as the company embarks on a stage of high growth.

If you know anyone who might be interested in the roles outlined above, please email Recruitment@renatus.ie ovisit our website at: https://go.renatus.ie/e/512701/2024-05-26/7frdws/1515406058/h/yBsyZr8Lt1lSOPgmuGd5C1_DzeGjRL_MUFFP8oToYP8careers/. Alternatively, feel free to reach out directly to any Renatus team member.  

The Real Deal 2024 Highlights

For those of you who may have missed The Real Deal, or simply want to recap on the day, we have highlighted some insights shared by our distinguished guest speakers, composed of prominent Irish business leaders and entrepreneurs. 

The conference commenced with the highly anticipated “Deal Of The Year” interview featuring keynote speaker Niall Molloy, CEO of Echelon Data Centres. Dive into the full interview below where Niall spoke about his early career, property development, the next wave of Irish investment, data centres, AI, and more. View Niall Molloy’s Interview    

You can also explore the wealth of knowledge shared by all our panellists throughout the day, now accessible to view below: The Real Deal 2024 Video Library

M&A Activity

Zartis receives investment from Development Capital

Deal Details: Development Capital has invested €10m in Zartis for an undisclosed stake in the business.

Zartis is a Cork-based provider of bespoke software development solutions across areas such as technology consulting, team augmentation and product development. The company was founded in 2009 and is currently led by CEO Padraig Coffey. In FY Dec’22 the company reported a turnover of c. €19.3m which converted to EBITDA of c. €1.0m.

Development Capital, founded in 2013 by Andrew Bourg and Sinead Heaney, is an Irish development and growth capital fund manager. It is an arm of the accountancy firm BDO.

Advisers:
Zartis:
Corporate Finance: Deloitte led by Anya Cummins, Paul O’Neill, Sharné Reeves and Ajit Nambiyar.
Vendor DD: Deloitte led by Conor Cullen and Claire Grimes.
Tax: Deloitte led by Niamh O’Donoghue.
Legal: ReganWall led by Kieran Regan and Deirdre Potenz.

Development Capital:
FDD: PwC led by Ronan Somers and John Finnegan.
TDD: PwC led by John Murphy and Alanna O’Doherty.
Legal: Eversheds Sutherland LLP (Ireland) led by Enda Cullivan, Gerard Ryan, Amritha Kumar and Mary Sheehan.
CDD: KPMG led by Chris Brown, Morgan Mullooly, Byron Smith, Molly Boyne and Caolan Heaney.

Renatus Comment: Zartis has carved out an impressive niche for itself in recent years within the industry of IT consulting and workforce augmentation (similar to outsourced software development). It has used the approach of focusing on niche, high-growth sub-sectors such as FinTech and MedTech and has grown a strong blue-chip customer base that includes Cubic Telecom, eShopWorld and Global Shares. Demand for its services is being driven by the continued digitalisation of business processes across the world. Both of Zartis’ core sectors are highly fragmented globally, with players of all sizes spread across a range of geographies.

Source: Zartis Press Release

CR2 acquired by Hightech Payments Systems

Deal Details: CR2 has been acquired by Hightech Payments Systems (HPS). Deal consideration was not disclosed.

CR2 is a Dublin-headquartered digital banking and payments software firm founded in 1997. The global fintech firm is led by CEO Fintan Byrne, with offices in Dublin, Dubai, Jordan, Egypt, India and Australia. In FY Jun’23 the company reported a turnover of c. €23.8m which converted to an EBITDA of c. €1.8m.

HPS is a Moroccan-headquartered cards and payments technology company with over 500 clients in 95 countries. The company is led by co-founder and CEO, Abdeslam Alaoui Smaili. The company is listed on the Casablanca stock exchange.

Advisers:
CR2:
Tax DD: KPMG led by Anna Scally and Helen Sleator.
Financial DD: KPMG led by Gavin Sheehan, Domhnaill Drumm and Conall McNally.
Commercial DD: KPMG led by Chris Brown and Gavin Duffy.
Corporate Finance: PwC

HPS:
Financial: Evercore.
Legal: Norton Rose Fulbright and Matheson LLP.

Renatus Comment: CR2’s digital banking, digital wallet and payment capabilities are now provided to dozens of international financial organisations across 45+ countries. Some examples include ANZ, the Australian and New Zealand Bank, Royal Bank of Scotland, Fidelity Bank, and Standard Chartered. Its proposition enables banks to transition to digital banking and payments from cash-based systems. The business should enjoy growth, backed by structural tailwinds in emerging markets in Africa and APAC where both population and GDP are growing steadily. Adoption of digital and cashless payments is still at an early stage vs. Western markets and this presents a major opportunity for CR2, especially as regulation becomes more favourable in these jurisdictions.

Source: Business Post

OMC Group has acquired James Roche Consulting Engineers

Deal Details: OMC Group has acquired James Roche Consulting Engineers. Deal consideration was not disclosed.

OMC Group is a Galway-based multi-disciplinary building consultancy firm. It was founded in 2012 as Enda O’Malley and Associates before rebranding to OMC in 2023. It does not report turnover or EBITDA information.

James Roche Consulting Engineers is a Galway-based engineering consultancy business established in the 1970s. It is led by James Roche who will join OMC as a consultant post-deal. The business does not report turnover or EBITDA information.

Advisers: None mentioned.

Renatus Comment: This deal follows OMC’s acquisition of O’Halloran Engineering in 2022 with the company also saying that it has plans to complete two additional deals in 2024. OMC’s expansion efforts are expected to create 20 new jobs nationally, emphasising a focus on “leveraging synergies” as it grows by acquisition.

There is a major shortage of skilled engineers in the Irish market currently, with a 2023 survey from Engineers Ireland stating that 72% of respondents are “majorly concerned” about sourcing talent. M&A is a tool that can be used by growing firms to bolster their staff with experienced teams of engineers from smaller target firms.

Source: Business Plus

Boyce Precision Engineering completes an Employee Ownership Trust

Deal Details: 27 employees of Boyce Precision Engineering have acquired full ownership of the company through an Employee Ownership Trust transaction.  The transaction was partly financed by Danske Bank and Whiterock.

Boyce Precision Engineering is an Armagh-based precision engineering firm that manufactures specific component parts for the aerospace, defence, pharmaceutical, textile, motorsport, and food industries. It operates from an 18,000 sq ft manufacturing facility at Charlestown Road Industrial Estate, which opened following a £6.9m investment in 2019. Joint Managing Directors include George and Brian Boyce. The business does not report turnover or EBITDA information.

Advisers:
Boyce Precision Engineering:
Deal advisory: Grant Thornton led by Paul Prenter, Andrew Rigby and Colin Piggott

Renatus Comment: By the end of 2023, the UK had a reported 1,400 employee-owned (EO) businesses, a 40% increase from 2022. Employee Ownership Trusts (EOTs) are designed to support employee ownership of companies. An EOT allows a company to be owned by its employees and can be set up by existing owners as part of their exit or succession plan, or by founders of a new business. The EOT model is an interesting option in succession planning.  If properly structured the sale can be tax-free for the selling shareholders. It has become more common in recent years in England, Scotland and Wales, and it is anticipated that it could be seen more frequently in Northern Ireland in the future.

Source: Boyce Precision Engineering Press Release

 

Freeflow acquired by Flex

Deal Details: FreeFlow has been acquired by Flex. Deal consideration was not disclosed.

FreeFlow is a product lifecycle specialist that offers a cloud-based B2B secondary marketplace for asset disposition, enabling customers to sell surplus and returned inventory. In FY May’23 it reported a turnover of c. €29.3m. It was owned by Pierette O’Shea and Bernie Cadogan.

Flex is a US-based manufacturing company that designs and builds products across a broad range of sectors. In FY Mar’24 it reported a turnover of c. $26.4bn which converted to an EBITDA of c. $1.6bn.

Advisers:
Flex:
Legal: Simmons & Simmons.

FreeFlow:
Legal: Arthur Cox.

Renatus Comment: This deal follows Flex’s 2021 acquisition of Dundalk-based provider of hardware to the data centre sector, Anord Mardix, for a reported $540m. FreeFlow’s digital marketplace platform and offerings will bolster the company’s product lifecycle services portfolio spanning design, supply chain, advanced manufacturing and more. Freeflow has an impressive client base that includes Microsoft, Virgin Media and Netgear.

Source: Flex Press Release

IPM Environmental Services acquired by Tyro Group

Deal Details: IPM Environmental Services has been acquired by Tyro Group t/a Vergo Pest Management. Deal consideration was not disclosed.
​​​​​
IPM Environmental Services is an Irish pest control and environmental service provider. The business was established in 2012 by Eamonn and Brenda Kennedy and operates in Thurles, Co. Tipperary. It does not report turnover or EBITDA information.

Tyro Group is a European pest management group that consists of pest management companies in the UK, Sweden, Norway and Finland. The group’s companies provide pest control services to a variety of sectors including residential, food manufacturing, healthcare, retail and hospitality. The group is majority-owned by a fund managed by Norvestor. It does not report turnover or EBITDA information.

Advisers:
IPM Environmental Services:
Corporate Finance: Benchmark International led by Pieter Joubert, Marian May Dennehy and Alex Cregan.
Legal: Butler Cunningham & Moloney Solicitors led by Deirdre Lyons.

Tyro Group/ Vergo Pest Management:
Legal: DAC Beachcroft led by Chloe Fullerton and John Williams.
Financial DD: Azets led by Jack Swinburne, Cynthia Cao and Dean Buttimer in conjunction with PKF Francis Clark led by Andrew Killick and Matt Pearce.
Tax DD: Azets Ireland led by Kevin Quinn and Nicole Doyle.

Renatus Comment: According to the Irish Pest Control Association, there are c. 46 approved companies in the industry which deal with pests of all types including rodents, pigeons and insects. While it remains a relatively niche space, IPM has distinguished itself as one of the premier players in the Irish market, noting the likes of Kerry Group, Johnson & Johnson and MSD among its corporate clients.

Source: Azets Press Release

Sheil Kinnear acquired by Xeinadin

Deal Details: Sheil Kinnear has been acquired by Xeinadin. Deal consideration was not disclosed.

Sheil Kinnear is a Wexford-based accountancy firm founded in the 19th Century by Joseph Lawton, with the firm taking its current form following a merger between Jimmy Sheil’s firm and J.A. Kinnear & Co in 1961. The business was owned by David O’Connor Aidan O’Gorman, Anita Power and Timothy Quinlivan. It does not report turnover or EBITDA information

Xeinadin is a London-based financial services and advisory company. The company received investment from private equity firm Exponent in May 2022. In FY May’23, the business reported a turnover of c. £131.6m, which converted to an EBITDA of c. £35.6m.

Advisers:
Xeinadin Group
Legal: ReganWall led by Kieran Regan, Emma Cafferky and Sarah Connolly

Sheil Kinnear:
None mentioned

Renatus Comment: This announcement marks Xeinadin’s 20th acquisition within the past two years with recent deals including K Magill & Co, Quintas and McKeogh Gallagher Ryan. The trend of consolidation in the accountancy industry continues at rip-roaring speed across both the UK and Ireland with a recent report by Accountancy Age stating that 40 accounting firms within the UK’s top 100 had engaged in M&A activity during the last financial year.

Source: Xeinadin Press Release

Management of Phone Pulse Increase Shareholding

Deal Details: The management of Phone Pulse have acquired shares from founder Michael Kennedy in a deal financed by PTSB.

Phone Pulse is a Wicklow-based telecommunications company that provides phone systems, communication products and applications to almost 3,000 customers nationwide. It was founded and led by Managing Director Michael Kennedy. It does not report turnover or EBITDA information.

The management team subscribing for shares includes Keith Murphy (Technical Manager), David Lang (Sales Director) and Leighton Brennan (Telecoms Specialist).

Advisers: None mentioned.

Renatus Comment: As a Zoom Platinum Partner, Phone Pulse enjoyed strong growth during the pandemic with the widespread adoption of Zoom and other digital communication technologies. It also provides both small businesses and large enterprises with SIP (VOIP) Lines over its own co-located data centre infrastructure. M&A in the Irish business telecoms market has been relatively common in recent times with this deal following IP Telecom’s acquisition of Centrecom back in March. The likes of Viatel and DigitalWell have also completed several acquisitions as part of inorganic growth strategies in recent years.

Source: The Sunday Times

Deal Updates & Other News

Clarification: Zartis receives investment from Development Capital

Deal Details: Zartis has received investment from Development Capital, reported to be c. €10m.

Zartis is a Cork-based provider of bespoke software development solutions across areas such as technology consulting, team augmentation and product development. The company was founded in 2009 and is currently led by CEO Padraig Coffey. In FY Dec’22 the company reported a turnover of c. €19.3m which converted to EBITDA of c. €1.0m.

Development Capital, founded in 2013 by Andrew Bourg and Sinead Heaney, is an Irish development and growth capital fund manager. It is an arm of the accountancy firm BDO.

Source: Dempsey Corporate/ Zartis/ Development Capital Press Release

Intel sells stake in Leixlip plant to Apollo Global Management

Deal Details: Intel has sold a 49% stake in its Irish manufacturing facility under-construction in Leixlip, to Apollo Global Management. The deal is valued at c. $11bn (€10bn).

Intel is an American multinational tech company. Its Leixlip plant is a high-volume manufacturing facility currently under construction that will produce wafers using Intel 4 and Intel 3 process technologies. The deal will enable Intel to retain control while gaining funding for the project.

Apollo Global Management is an American asset management business focused on alternative assets. The business has c. $85bn AUM.

Source: The Irish Times

Company Performance

EBITDA  is an accounting term and is often the best indicator of profitability in non-capital intensive businesses before financing and tax are considered. In capital-intensive businesses EBIT or EBITDA less average Capital Expenditure are often better measures. YoY is an acronym for the year-on-year movement in turnover, EBITDA, etc.

Wilton Recycling (“Wilton Waste Holdings Ltd”) is a Cavan-based provider of scrap metal recycling, skip hire and a range of waste management and refined recycling services. The company is family-run and wholly owned by Rodney Wilton.

In its financial year to June 2023, the business generated a turnover of c. €74.7m, an increase of c. 22.0% year-on-year. This converted to EBITDA of c. €6.5m, an increase of c. 0.6%.

The business finished the year with a cash balance of c. €5.3m, a c. €0.8m decrease on FY Jun’22. This was largely driven by significant capital investment to acquire tangible assets.

The business employed an average of 106 people over the period at a total cost of c. €5.6m.

Fundraisings

Who: Spectrum.Life, a Dublin-headquartered workplace mental health and well-being digital platform founded in 2018 by Stuart McGoldrick, Dr Sarah O’Neill and Stephen Costello (CEO).

What: The company has raised €17m in a funding round led by Act Venture Capital.

Why: The company intends to use the funds to enter new international markets following its successful expansion into the UK in 2020.

Source: Business Post

Who: Graphite-Note, a Kerry-based machine learning platform.

What: The company has raised €1.2m in a seed funding round with investment from Enterprise Ireland and Harvest Financial CEO Gerry Devitt.

Why: The funds will be used by the company to bolster international growth and add 25 jobs.

Advisors:
Legal:​​​​​ Wallace Corporate Counsel LLP led by Alan Ryan, Michael Bambrick, Graham J. Coyne, Fran Keogh, and James Collins Caffrey.

Source: Business Plus

 

Who: Inspeq-AI, a Dublin-headquartered platform aimed at optimising the production and development stages of generative AI.

What: The company has raised $1.1m in a funding round led by Sure Valley Ventures (SVV), with other investors including Delta Partners, Founders @Dogpatch Labs, Plug and Play and a number of angel investors.

Why: The investment will be used to hire a number of roles across R&D, applied AI and data science as well as grow the company’s operations in Ireland, London and India.

Source: Irish Times

Who: Habitus Health, a Cork-based provider of technology and analytics that prevents workers from feeling back and neck pain, founded by Ed Harnett and Breffni Allen.

What: The company has received funding from Lakeside Caital, led by Aongus Hegarty. Ray Nolan is reported to be among the other backers.

Why: The company will use the funding to fuel growth and expansion.

Source: The Sunday Times

 

Who: XOcean, the Louth-based manufacturer of autonomous boats used to survey the ocean for offshore developments.

What: The business has raised €6.5m in a funding round led by VentureWave Capital.

Why: The funding will be used to grow its existing fleet and invest in continued product development.

Source: Sunday Times

Executive and Board Appointments

 Caimin Keane

Source:
(Google Images & LinkedIn)

Scott Davison

Source:
(Google Images & LinkedIn)

Attracta van Rensburg

Source:
(Google Images & LinkedIn)

Danny McEntee

Source:
(Google Images & LinkedIn)

Michaela Herron

Source:
(Google Images & LinkedIn)

@RenatusCapital Tweets

-48%

The fall in venture capital funding for start-ups in Ireland to €259m in the first three months of the year, compared with €502m during the same period in 2023, according to @IVCA

7.7%

The top 7.7% of all earners now pay more than half of all income tax in Ireland, according to @PBO

4.7%

The rise in average weekly earnings in Ireland, in the 12 months to March 2024, according to @CSO

14,009

The number of people in emergency accommodation in Ireland in April 2024, the highest number since records began, according to @DepartmentofHosuing

About Renatus

Renatus was established in 2014 to provide growth funding to growing Irish SMEs and to partner with ambitious management teams to help companies reach their full potential.

Renatus targets companies with sustainable earnings of €1m+ and valuations typically in the range of €5m – €20m. Our typical solutions include:

  • Succession planning
  • Management buyouts
  • Management buy-ins
  • Growth financing – both organic and acquisition growth financing
  • Full and partial share sale

Our Family of Investments

Current Portfolio:

Flew the Nest:


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