InsightsNewsletterRenatus’ Private Equity M&A Newsletter – 26/05/2024

Renatus’ Private Equity M&A Newsletter – 26/05/2024

Thought for the Week

Tony O’Reilly RIP

None of us at Renatus ever had the pleasure of meeting Tony O’Reilly, but many of us have been inspired by him. His Fitzwilton vehicle was arguably the first private equity vehicle in Dublin, and we were honoured, along with Mike Flanagan and Rennicks, to be entrusted as the custodians of the last business holding in Fitzwilton following the MBO of Rennicks. How he ended up in a position to be declared bankrupt and whether it should have been allowed to happen are questions for another day. His sporting achievements alone are extraordinary. His philanthropic legacy via The Ireland Funds will continue to have huge impact for generations to come and will be hard matched by other billionaires. His vision to create the Kerrygold brand is another legacy Ireland should be proud of. Though he did not fit the mould of a CEO for one of America’s leading companies, he led it to great success. There has been an entire generation inspired by him, and to different extents, Tony Ryan and Michael Smurfit.

Some interesting findings include:

We re-read “The Player: The Life of Tony O’Reilly” by Ivan Fallon, published in 1994, and summarised our findings below. He never engaged in the beer culture of rugby and was always focused on business, even as a student. His self-training and improvement methods were ahead of his time, and anything he did in business involved extensive preparation. When he studied for his law exams for four months in the summer, he did nothing else, literally chaining himself to his desk and avoiding the outside world. He achieved first place in the country for both parts 1 and 2. One of his rugby teammates said, “He makes you feel better for meeting him. He makes you feel as if it’s you who’s being funny. And he could go up or down at any level, even when he was nineteen.”

At 21, he joined a management consulting firm in the UK, where he learned the basics of industrial management at a very young age. A line from the book should be part of any graduate induction programme: “He had immense self-confidence, an extraordinary memory for faces, names, and detail, and an inquisitive mind that sought to understand how everything worked. He discovered that he liked and could absorb large quantities of figures and statistics. Despite the distractions of rugby, he had a huge appetite for work, needing little sleep and being quite prepared to work through the night. He also made sure he got on well with the people he worked with, using his charm and quickness of wit to make friends quickly.” At 24, he joined John M. Sutton & Son, a Cork merchant business, as an assistant to the chairman. He would probably be called Chief of Staff in today’s parlance. When he was overlooked for the top job  the chairman’s had a tragic accident, he took the role of head of the newly formed An Bord Bainne. This pivotal moment sowed the seeds of one of Ireland’s first success stories, Kerrygold. O’Reilly and the board’s vision was to create a brand for Irish butter exports rather than treating it as a commodity. Outside of Guinness, it is hard to think of an Irish branding effort like it at that time. Jim Foley of the Dungarvan Co-op and Paddy Power of Ballyclough co-op in Mallow should be acknowledged for appointing O’Reilly at age 26.

Kerrygold was formed at a time when it became accepted that De Valera’s pursuit of self-sufficiency, while romantic, was not working. This period marked the beginning of a shift in mindset, helped by T.K. Whitaker’s strategic letters, which inspired Lemass to join the European Economic Community (“EEC”). O’Reilly had to navigate many closed-minded, territorial factions within the farmer co-op movement, and no stakeholder management module at Harvard could match that experience. What followed was an amazing success.

He was headhunted by Jack Lynch and Charlie Haughey to lead the state-owned Irish Sugar Company, with a particular focus on its subsidiary Erin Foods, which was haemorrhaging cash. He orchestrated a master deal with Heinz to stop the cash bleed and create an effective joint venture, leveraging Heinz’s manufacturing and distribution expertise. This steadied the ship in the short term. Heinz was impressed by O’Reilly and offered him the role of head of UK operations at $100,000 a year, which was too good to refuse in his early thirties. Concurrently, in 1970, he set up a private capital firm, which would become Fitzwilton, at home with their first investment in Crowe Wilson, a wholesale drapery company. He held a 32.5% stake, and his two full-time partners, who joined from Allied Irish Investment Bank, held 22.5% each. They went on to make smaller acquisitions before acquiring the giant fertiliser company Goulding.

In 1971, he was offered a move to Pittsburgh with Heinz. A senior Heinz executive said, “He had this huge personality, quick wit, and was the best speech-maker I ever heard. He could sing and play the piano, tell jokes, quote Oscar Wilde or Churchill, and knew more about your business than you did. His attention to detail and meticulous annual planning were seen as his great strengths, leading him to the top at Heinz. He instilled rigid discipline with a two-year payback on new product development and a minimum 35% return on capital. At 36, his salary was raised to $250,000 a year. In 1973, he separately acquired the Irish Independent Group. The same year, he was made President of Heinz. Every second week, he left Pittsburgh for Dublin at 6 pm  to attend to his Irish interests, returning by Monday morning. When questioned about his focus, he said he did not play golf.

An interview revealed that his lifestyle was a burden and not all roses: “The thing I regret most is that I’ve got myself into a lifestyle that is really grinding. While there may be an aura of romance, success, and all that nonsense, the reality involves grinding hours, lack of sleep, detailed analysis of financial reports, business planning cycles, and absence from home.” Not yet 40, he was on his way to becoming the chief executive of one of America’s biggest corporations and Ireland’s biggest industrialist. When asked what motivated him at this time, he said, “It’s a cocktail, it’s a combination of commitment, family, people, ego, institutions, country and to some degree money – though I don’t think that’s the primary catalyst”

In 1975, at 39, his assumed profits on Independent were £950,000 Irish pounds, but it made only £203,000 due to the oil price crisis and works recession. Fitzwilton, and in particular its Goulding holding, was under significant pressure. He also got involved in Tara Mines and an exploration company, which were also under pressure. His personal borrowings were enormous, and even his $350,000-a-year salary could not service them. A takeover approach for Tara bought him liquidity and time. Although the banks moved in and did everything but receivership of Fitzwilton, many holdings were sold, and by 1975-76, the remaining assets and the Independent began to recover.

In 1980, at 44, he became Chief Executive of Heinz when the share price was $10, rising to $55 five years later. He went on to become Chairman, displaying a masterclass in strategy (staying number one in most markets), acquisition (acquiring Weight Watchers was a game-changer), leadership, politics, new product development, and more. With cash building in 1980, he set up Atlantic Resources to drill for oil off the south coast of Ireland. Shares went from 50p, peaking quickly at 395p, sinking to nothing, then rushing to 610p (a £140 million market cap) before eventually collapsing in the early 90s. He claimed they may have found the only puddle of oil ever found!

At 50, he set up The Ireland Funds, contributing to universities and many other charities. The book does not chronicle what follows with Waterford Crystal, the Independent, etc.

The book concludes; 

Who am I ?

Well, I feel I’m a representative of Ireland. I keep coming back to the fact that I come from that small island of Ireland, and we are an estimable people, with great achievements behind us and in front of us. I represent one of the new Elizabethans from Ireland. Every time I achieve something or fail to achieve something, although there is not much economic consequence to it these days, I feel the weight of being Irish and being representative of the hopes and aspirations and dreams of the Irish around the globe. I hope I will have made the climb a lot easier for subsequent Irishmen and Irish women. That was in 1994, and while he may have pulled a few muscles late in the last quarter of the game of business, he was still the man of the match. 


May he rest in peace. 

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

Eco-Modular Buildings acquires Masterkabin

Deal Details: Eco-Modular Buildings has acquired Masterkabin. The deal consideration was not reported.

Eco-Modular Buildings provides cabins and modular buildings for the construction, education and healthcare sectors. Founded by Malachy Menton over 10 years ago, the company is owned by the Menton family and is based in Dublin. The business does not report turnover or EBITDA information.

Masterkabin is a Cork-based modular, off site and portable building solution provider serving similar end markets to Eco-Modular. The company is wholly owned by managing director Anthony O’Donovan. In FY Dec’22 the company reported a turnover of c. €7.4m with an EBITDA of c. €2.7m.

Advisers:
Eco-Modular Buildings:
FDD & M&A: Interpath Advisory led by Liam Booth, Kevin Brett and James Gibson
Legal: Maguire McErlean 

Masterkabin:
Corporate Finance & Tax: EY led by Ronan Murray, Peter Neville and Natalie Bright
Tax: EY led by Frank O’Neill and Richard O’Dwyer
Legal: Lavelle Partners led by Griana O’Kelly

Renatus Comment: Modular buildings are becoming an increasingly popular alternative to traditional construction methods. Solutions offered by both Eco-Modular and Masterkabin are cost-effective, environmentally sustainable, and much faster to implement. In an era where environmental consciousness is paramount, modular construction stands out as an excellent choice for businesses committed to reducing their carbon footprint. Consequently, the demand in this market is set to grow.

Source: Irish Examiner

CVS Group sell Irish and Netherlands operations to Global Veterinary Excellence Limited

Deal Details: CVS Group has divested from it’s Irish and Netherlands operations which are being sold to Global Veterinary Excellence Limited. The cash consideration for the assets is a reported €2 with CVS also providing a €600k unsecured loan at market rate to Global Veterinary Excellence.

CVS Group is a veterinary group with over 500 practices and 9,000 employees across the UK, Australia, Netherlands and Ireland. Headquartered in the UK and led by CEO, Richard Fairman, the group is listed on the UK stock exchange and currently has a market cap of c. £770m. In FY Jun’23 the group reported a turnover of c. £608.3m with an EBITDA of c. £121.4m.

Global Veterinary Excellence Limited is owed by a former director at CVS, James Cahill, who worked at the group for six years with over 30 years in veterinary experience. The company does not report turnover or EBITDA information.

Advisers: None Mentioned.

Renatus Comment: The Competition and Markets Authority (CMA) initiated a review of the veterinary sector last year, outlining various concerns in the market. These include insufficient consumer information to select the best veterinary practice or treatment, localized market concentration resulting from sector consolidation, potential actions by large corporate groups that could diminish choice and competition, potential overpricing of pet medicines, and an outdated regulatory framework that may no longer be suitable. This scrutiny led to pressure on shares of CVS and Pets at Home, with CVS Group PLC plummeting by 29% to 1,476.47p, and Pets at Home Group shares declining by 10% to 339.80p at the time of announcement.

As of May’24, the TEV/LTM EBITDA ratio for CVS currently stands at c. 8.39x, compared to 15.63x as of Sep’23. CVS, along with certain other corporate groups that collectively own around 50% of first opinion practices in the UK, has proposed a package of potential remedies to address the concerns raised by the CMA.

Source: Irish Independent

Kelly Services Ireland acquired by Gi Group

Deal Details: Kelly Services Ireland has been acquired by Gi Group. The deal value was not reported.

Kelly Services Ireland is a staffing business providing part-time and permanent staff to the life sciences, renewables and engineering sectors. The business has offices in Galway and Cork. Kelly Services Ireland will operate as Gi Group Ireland with the current Kelly team transitioning over to the new entity along with the current clients. The company does not report turnover or EBITDA information.

Gi Group is a HR services firm specialising in the labour market and recruitment. Founded in Italy in 1998, the company has grown internationally to over 37 countries and 25,000 clients. It is currently led by CEO, Stefano Colli Lanzi.

Advisers: None Mentioned.

Renatus Comment: The acquisition of Kelly Services Ireland is a strategic move, addressing the ongoing talent shortages in Ireland. According to Manpower Group, c. 81% of Irish companies are facing recruitment challenges in 2024, highlighting a significant opportunity for the multinational recruitment firm.

Source: Business Plus

SYS Group acquires Global Life & Finance

Deal Details: SYS Group has acquired Global Life & Finance. The deal consideration was not reported.

SYS Group offers services in retirement planning, investments, savings, inheritance and succession planning. Headquartered in Tipperary, the company was founded in 2015 by Tony Delaney. In FY Dec’22 the business reported a turnover of c. €2.9m with an EBITDA of c. €195k.

Global Life & Finance is a financial planning firm headquartered in Cork. The company was founded in 2000 by majority shareholder, Seamus Fox who will stay on post-acquisition. Other shareholders include Geraldine Fox and Marguerite Cunningham. In FY Dec’23 the company reported a turnover of c. €607k.

Advisers: None Mentioned.

Renatus Comment: The addition of Global Life & Finance will see SYS Group’s AUM grow to a reported €500m with c. 8,500 clients. SYS Group’s impressive growth since its inception in 2015 has come form both organic and acquisition means having most recently acquired Donald P McKenna & Associates in March 2023 which took the groups AUM to c. €315m.

Source: Business Post

HireHive acquired by Jobtoolz

Deal Details: HireHive has been acquired by Jobtoolz. The deal consideration was not reported.

HireHive is a Cork-based recruitment and applicant-tracking software (ATS) start-up. The software, which is used by SMEs to Fortune 500 companies, provides recruitment tracking services from sourcing to hiring in one place. The company was founded by majority owner, John Dennehy. The business does not report turnover or EBITDA information.

Jobtoolz is an applicant tracking system and recruitment marketing platform. The company is based in Belgium and was acquired by UK-based Invincible Software Holdings (ISH), a SaaS focused investment firm, in June 2023. The company does not report turnover or EBITDA information.

Advisers:
HireHive:
Corporate Finance: Eden Capital led by Sam Hunt.
Legal: Regan Wall led by Adrian Wall.

Jobtoolz:
Legal: Philip Lee led by Anna Hickey and Kevin Keenan.

Renatus Comment: ISH, which previously acquired the Netherlands-based ATS provider Homerun, has now added HireHive to its portfolio. This acquisition brings synergies for both parties, as HireHive’s diverse customer base in Ireland, the UK, and the USA helps expand ISH’s geographic reach. Conversely, HireHive stands to benefit from ISH’s international experience and capital investment, positioning the platform for further growth.

Source: The Currency 

Deal Updates & Other News

Keywords Studios in advanced discussion for sale to EQT

Deal Details: Keywords Studios, an international technical and creative services provider to the global video games industry based in Dublin, is in advanced discussions with the private equity firm EQT for a potential takeover. The proposed deal values the London-listed company at £2.2 billion (€2.6 billion), EQT is negotiating over a possible cash offer of £25.50 per share. Following the announcement, shares in Keywords surged 62% on Monday morning, as the company indicated it would likely take the offer from Swedish private equity investor EQT Group. Under Britain’s takeover rules, EQT has until June 15 to either make a firm offer or walk away.

Advisers:
Keywords Studios:
Legal: DLA Piper led by Matthew Cole and Jon Earle.

EQT:
Legal: Simpson Thacher

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.

Woods Supermarkets Ltd, is a group of SuperValu outlets and filling stations based in Northern Ireland. The Woods chain of outlets and filling stations are owned by Philip, Margareta and Joseph Woods.

In its financial year to July 2023 the business generated a turnover of c. £30.5m, an increase of c. 18.2% year-on-year. This converted to an EBITDA of c. £2.3m, an increase of c. 6.1%.

The business finished the year with a cash balance of c. £2.7m, an 11% increase on FY Jul’22. Significant post-EBITDA cash movements repayments of borrowings and the purchase of tangible fixed assets.

The business employed an average of 190 people over the period at a total cost of c. £2.6m.

Fundraisings

Who: Nory, a Dublin-based business offering AI-driven operating systems for the hospitality sector.

What: The company has raised €14.7m in Series A funding led by venture capital firm Accel supported by Cavalry Ventures, Playfair, Samaipata and Triplefair.

​​​​​​​​​Why: The funding will be used to develop the product and expand internationally with the company currently in the UK, EU and US markets.

Source: Irish Independent

Who: EnteraSense, a Galway-based medtech company founded by Donal Devery.  

What: The company has  raised €3.8m in fresh funding. The two lead investors in the latest round of investment were Cook Medical, with which EnteraSense just struck a US distribution deal, and a venture capital fund linked to the University of Tokyo.
​​​​​
​​​​​​​​​Why: EnteraSense recently struck a distribution deal with Cook Medical in relation to a new blood-sensing technology it has developed. The use of the new funds was not disclosed.

Source: Irish Times

Who: Wizso, a water saving flush tablet start-up based in Northern Ireland.

What: The company raised £350k in a second seed funding round.
​​​​​
​​​​​​​​​Why: The funds will be used to develop the product and tap into environment-conscious consumers and enterprise.

Source: Belfast News Letter

Who: Reap Interactive, a livestock monitoring solution designed to optimise cattle management using a weighing scale and water trough.  

What: The company raised €1m in private investment through a combination of Enterprise Ireland and another private equity investor.
​​​​​
​​​​​​​​​Why: The funding will be used to hire more staff for sales, marketing and field operatives.

Source: Business Post

Who:  The Misunderstood Heron, a Connemara based seafood truck.

What:  The business has received €63k in funding supported by Bord Iascaigh Mhara (BIM).
​​​​​
​​​​​​​​​Why: The investment will be used to improve energy and waste efficiency, as well as to acquire new kitchen equipment.

Source: Business Plus

Executive and Board Appointments

Orla Stevens

Source:
(Google Images & LinkedIn)

Sarah Jennings

Source:
(Google Images & LinkedIn)

@RenatusCapital Tweets

13.7%

The increase in new car sales in the EU in April according to @ACEA_auto

73%

The percent of business owners in Ireland that find grant funding complex according to @Ibec

64%

The percent of mortgage approvals from first-time buyers in April 2024, up 17.7% from March, according to @BPFINews

35%

The proportion of Irish diets that account for ultra-processed food according to @UCC

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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