Renatus’ Weekly M&A Newsletter – 27/08/2023
August 29, 2023
Renatus’ Weekly M&A Newsletter – 10/09/2023
September 10, 2023
Renatus Weekly M&A & Company Performance Private Equity Newsletter 03/09/2023
Dear Reader,
Please find below this week’s newsletter covering the latest M&A, company performance, fundraisings and executive moves.
THOUGHT FOR THE WEEK
Many growing companies will pursue acquisitions at some point in their life cycle. A key consideration when approaching M&A is the strategy employed. McKinsey recently conducted a study of the world’s 2,000 largest public companies to identify the most common and successful M&A strategies.
These growth strategies could be split into 4 brackets:
- Programmatic M&A – defined by McKinsey as companies averaging more than two deals per year.
- Selective – two or fewer deals per year.
- Large Deal – where the target’s market cap is at least 30% of the acquirer’s market cap.
- Organic – one deal or fewer every three years.
The results, based on Total Shareholder Return ‘TSR’, make for interesting reading. Taking a programmatic approach to M&A gives companies the greatest likelihood of generating excess TSR with comparatively lower levels of risk.
- Programmatic acquirers were found to generate 2.3x excess TSR vs -1.6x for organic companies.
- High-growth programmatic acquirers outperformed high-growth companies that followed an organic approach. Comparing those players with positive revenue growth, programmatic acquirers saw 4.7x excess TSR vs 1.6x TSR for organic companies.
The lesson is that if pursuing M&A, companies should make it a clear strategic priority. The data clearly suggests that a targeted, formulaic approach stands the best chance of success for a company’s shareholders.
It is important to caveat these findings by saying that some businesses lend themselves to accretive M&A more than others. For example, software businesses are generally better able to retain revenue while reducing the overheads of acquisitions. Those with a platform that allows synergies (revenue or cost) to be realised, should make acquisitions a priority where the return on capital is attractive. Conversely, those in industries with high costs of integration should be cautioned against dealmaking for dealmaking’s sake and are usually better served focusing on growing their core offering.
McKinsey’s full report can be accessed here.
M&A Activity
Corporate Health Ireland acquired by Pam Group
Deal Details: Corporate Health Ireland has been acquired by Pam Group. Deal consideration was not disclosed.
Corporate Health Ireland (‘CHI’) is a health services provider, established as EHA in 1992. It has clinics in Dublin, Cork, Waterford and Limerick. The business was owned by Martin Hogan, Miriam Hogan, Brian Gallagher and Susan Power. It is reported to have annual revenue of c. €11.0m.
Pam Group is a UK-based provider of occupational health and wellbeing services. It was established in 2004. In FY Dec’21 it reported turnover of c. £39.1m which converted to EBITDA of c. £4.2m. The business is led by founder James Murphy. It received private equity investment from Lloyds Development Capital in 2021.
Advisers:
CHI:
Corporate Finance: Quintas led by Tim McCarthy.
Tax: Quintas led by Dave O’Brien and Maria Nugent.
Deal Advisory: Benchmark International.
Legal: JW O’Donovan Solicitors.
Pam Group:
Legal: Hill Dickinson, Dow Schofield Watts and ByrneWallace.
Financial: RSM Ireland.
Renatus Comment: This is Pam Group’s third acquisition of 2023 following its deals to acquire MedProtect and the occupational physiotherapy business of Connect Health in recenty months.
Occupational health is a space that is subject to an ever-increasing amount of regulation (both domestic and European). Employers are increasingly being compelled to ensure the health and wellbeing of their employees in a variety of settings. The demand for the services offered by CHI such as health screening, assessment and consultancy is likely only going to rise over the coming years, making it an attractive space for large consolidators.
Source: Irish Times
Celtic Linen acquired by Johnson Service Group
Deal Details: Celtic Linen has been acquired by Johnson Service Group. The deal was reported to be worth c. €31.5m.
Celtic Linen is a Wexford-based company that offers linen rental and laundry services, originally founded in 1926. It was reported that in the 12 months to January 2023 the business generated revenue of c. €29.0m which converted to EBITDA of c. €4.6m. The business was acquired by Dublin-based private equity firm Causeway Capital in 2016 after it had gone into examinership. Other significant shareholders included Joanne Somers (CEO), Keith Sheridan (Commercial Director) and Karen Sheridan (Director).
Johnson Service Group is a publicly-listed provider of textile rental and related services, based in the UK. In FY Dec 22 it reported turnover of c. £452.5m which converted to EBITDA of c. £115.1m.
Advisers:
Celtic Linen:
Corporate Finance: EY led by Fergal McAleavey, Luke Charleton, Ronan Murray, Jonny Forde and Robert Hussey.
Tax: EY led by Alison McHugh.
Strategy and Transactions: EY led by Breige McCartney, and Cristina Magherusan.
Legal: LK Shields led by Jennifer McGuire, James Byrne, Jennifer Dinneen and Pat Ryan.
Johnson Service Group:
None mentioned.
Renatus Comment: This exit is reported to be a strong result for the Celtic Linen shareholders who have gone on an impressive growth journey in the seven years since the business was acquired out of examinership. During that span the business carried out significant capital investment and also acquired Kildare-based Millbrook Linen in 2018. The company boasts a diversified, blue-chip customer base spanning several industries. Hospital customers are reported to include St James’s, St Vincent’s and Limerick University Hospital, while in hospitality, the company sells to several hotels in the Dalata and Press Up groups. No doubt like a lot of other Irish companies, the early Covid period was a scary time with hospitality volumes on the floor. This is proof to all businesses that staying in the game when times are challenging is crucial.
Source: Business Post
Errigal acquires Mac-Interiors
Deal Details: Errigal has acquired Mac-Interiors out of examinership. Deal consideration was not disclosed.
Mac Interiors is a Newry-registered construction business founded in 2002 by Paul McKenna. The business had many high profile clients including Microsoft, AIB, Ryanair, Pinterest, Barclays Bank and Citibank.
Errigal is a Derry-based construction business owned by Damien Treanor and Cormac McCloskey. The business has clients including Dunnes Stores, Cairn, Canary Wharf Contractors, and Sisk. In FY Dec’21, the business reported turnover of c. €97.2m which converted to an EBITDA of c. €12.8m.
Advisers:
Errigal:
Legal: Davidson McDonnell (Raymond Duddy) and Simmons & Simmons (David Brangam & Jenny Watters).
Mac Interiors:
Legal: McCann Fitzgerald (Alan Fuller & Sean Kehoe).
Interpath Advisory (Examiner):
Legal: A&L Goodbody (David Baxter & Stephen Ahern).
Renatus Comment: Mac Interiors was growing strongly pre-pandemic with reported revenue of c. €121m in 2019. However the business shut down for six months due to Covid-19 related work stoppages. As of April 2023, the business had net liabilities of c. €10m. The High Court set somewhat of a precedent by placing the business into examinership in the Republic given it is registered in Northern Ireland. The judge justified the decision stating that the company has its “centre of main interests” within the State.
The examiner gave his view that the business has a ‘reasonable prospect of survival as a going concern’. Now backed by Errigal’s experienced operators, the business should be under firmer footing.
Source: CCPC Notification/ The Currency
Grafton Plc acquires B McNamee Ltd.
Deal Details: Grafton Plc has acquired B McNamee builders merchants. Deal consideration was not disclosed.
Grafton Group was founded in 1902 and is one of the UK and Ireland’s largest manufacturers and retailers of building supplies. It is publicly listed on the London stock exchange. In FY Dec’22 it reported turnover of c. £2.3bn which converted to EBITDA of c. £294.3m
B McNamee Builders Merchants is a Strabane-based builders merchant business. The business was owned by Edmund & Geraldine McNamee and Owen & Kevin Falconer. It does not report turnover or EBITDA information
Advisers:
B McNamee:
Legal: EDG Legal led by Kevin McVeigh and John McElrone.
Corporate Finance: HNH led by Wayne Horwood and Connor McAnallen.
Grafton plc:
Legal: Arthur Cox led by Lynsey Mallon and David White.
Renatus Comment: Grafton Group continues to pursue acquisition-driven growth with the company’s chief executive Eric Born commenting that the company could spend over £750m on M&A activity in the next few years. In particular, the company is targeting areas in Europe where there are housing shortages. New builds account for c. 65% of the Irish construction material wholesale market. There is direct benefit to scale in this industry with gross margins tending to trend upwards as the top-line grows. Grafton Group has also commented on its desire to push environmentally friendly building materials and reduce CO2 emissions.
Source: HNH Press Release
Codex acquires DB Office Supplies
Deal Details: Codex has acquired DB Office Supplies. Deal consideration was not disclosed.
Codex is a Dublin-based provider of office supplies, established in 1979. It is owned by Brendan Murphy. In FY Dec’21 it reported turnover of c. €25.5m which converted to EBITDA of c. €1.5m.
DB Office Supplies is a Dublin-based office supplies company. It was owned by CEO Frank Sutton. The business does not report turnover or EBITDA information.
Advisers: None mentioned.
Renatus Comment: The rationale for this deal is interesting as Codex continues to diversify its product offering beyond just traditional office supplies. DB Office Supplies is a specialist in furniture and designs for offices, schools and public libraries and will fit into Codex’s office furniture segment. Somewhat surprisingly, this space has grown rapidly post-Covid with Codex having reportedly increased revenues 225% from these services on 2019 levels. This pivot is likely a wise move given the doubt surrounding future office occupancy rates and the rise of digital technologies will likely have a knock-on impact on demand for office consumables.
Source: Business Plus
Kieran Murphy & Co. merges with MG Ryan & Co.
Deal Details: Kieran Murphy has merged with MG Ryan & Co. Deal consideration was not disclosed.
Kieran Murphy & Co. is a Galway-based solicitors. The business was founded in 1975 and it is owned by Breda Tierney and Kevin McNamara. Kieran Murphy & Co does not report turnover or EBITDA information.
MG Ryan & Co. is a firm of solicitors based in Galway. The business has been in operation for over 30 years, and it does not report turnover or EBITDA information.
Advisers: None mentioned.
Renatus Comment: The business will operate under the name MG Ryan Kieran Murphy LLP and the merger will expand and enhance services provided by the group. There seems to be a wave of activity in the legal space with HBMO Solicitors being acquired by Clark Hill last week. Other recent deals include Leman Solicitors merging with Ogier, Kenny Solicitors merging with Eversheds Sutherland and Eames Solicitors merging with Clark Hill.
Source: Irish Legal
Bauer Media Group acquires Sales House Media Central
Deal Details: Bauer Media Audio Ireland has acquired Media Central. Deal consideration was not disclosed.
Bauer Media Audio Ireland is Ireland’s largest commercial radio group, with six stations including Today FM and Newstalk. The business is owned by Yvonne Bauer and headquartered in Hamburg. As of 2021, it had reported revenues in excess of €2.2bn.
Media Central is a media sales house that specialises in radio. Its clients include Today FM, Newstalk, 98FM and SPIN. The business was owned by Gavin Deans, James Conway and Mary Conway. It does not report turnover or EBITDA information
Advisers: None mentioned.
Renatus Comment: This deal follows Bauer Media’s acquisition of iRadio last week. Having previously partnered with Media Central, it will now take the company’s advertising and other capabilities in-house. Bauer Group’s acquisition-led growth in the Irish radio industry is a vote of confidence in a sector which continues to enjoy massive relevance, even as other legacy media such as print, decline. The latest JNLR/Ipsos report into radio listenership in Ireland, published in August, shows 3.3 million listeners tune into radio every weekday – equivalent to 80.2% of all adults.
Source: Business Plus
Eurometals acquired by Michael Heavey and Ciarán Fitzpatrick
Deal Details: Eurometals has been acquired by Michael Heavey and Ciarán Fitzpatrick. The deal was reported to be worth c. €3m.
Eurometals is a Dublin-based construction materials firm specialising in beads, profiles and brick reinforcing products. It was established by Patrick McGovern in 1981 and remained family-owned until this sale. The business does not report turnover or EBITDA information.
Michael Heavey and Ciarán Fitzpatrick are two of the shareholders of Fitzpatrick and Heavey Homes, a Dublin-based property development company.
Advisers: None mentioned.
Renatus Comment: It was reported that the purchasers intend to make a significant capital investment of c. €5m in the business, hiring up to 35 new staff. It has been well documented that Ireland has a massive need to deliver construction projects of various types (public and private) over the coming years and decades. Availability of materials and supply chain stability will be crucial if this demand is to be met. Developers such as Glenveagh have also moved upstream in the value chain in recent years through the acquisition of material suppliers. It will be interesting to see if this becomes a more common trend.
Source: Business Post
COMPANY PERFORMANCE
Cooneen By Design Limited is a garment manufacturer operating out of Fivemiletown, Co. Tyrone. The business is majority-owned by the McGuckian family.
In its financial year to December 2022, the business generated a turnover of c. £80.7m, an increase of 23.3% year-on-year. This converted to an EBITDA of c. £4.2m, an increase of 31.9% year-on-year. EBITDA improvements can be attributed to increasing revenue in tandem with the business realising operating leverage.
Significant post-EBITDA cash movements include working capital investment of c. £2.6m and an increase in amounts owed by a related party of c. £1.0m. The business finished the year with a negative cash balance of c. £5.4m, an improvement of 8.9% year-on-year.
The business employed an average of 189 people in FY22 at a total cost of c. £8.2m.
RECENT FUNDRAISINGS
Who: iNua Hospitality, an Irish hotel group that owns and operates regional four and five star hotels around the country.
What: The group has completed the refinancing of eight hotels from a group of lenders, including AllianceBernstein and Earlsfort Capital Partners. The deal was reported to be worth c. c. €70m.
Why: The group leveraged the strong performance of its hotel portfolio post-Covid-19, to secure ‘a more accretive financing solution’.
Advisors:
iNua Hospitality:
Debt Advisory: CBRE Debt and Structured Finance led by Paul Collins.
Legal: RDJ and Casey Stephenson Group.
Verdane:
Legal: Taylor Wessing led by Adam Griffiths, Dannie Hannie and Ameer Gazder.
Other lenders:
Legal: McCann FitzGerald.
Source: CBRE Press Release
Who: UrbanVolt, a Dublin-based company that installs and finances solar panels.
What: The company has raised €26m from European investment firm Verdane.
Why: The funding will used to fuel expansion in domestic and European markets.
Advisors:
UrbanVolt:
Deal Advisory: IBI led by James Doody and Eoin Nagle.
Source: Irish Times
EXECUTIVE AND BOARD APPOINTMENTS
We in Renatus believe that more important than the deals are the people and we are pleased to provide you with details of key recent executive and board-level appointments.
@RenatusCapital Tweets
13.5%
The new rate of VAT for tourism, hospitality and some other services, following an extended period at the reduced 9% rate (due to the impact of Covid-19) according to @IRLDeptFinance
7c & 5c
The increase in the price per litre of petrol and diesel respectively, following a government increase in excise rates this week, according to @RTE
50.8
The level of AIB’s purchasing managers’ index (PMI) survey for August, representing an increase in manufacturing activity (50 represents zero month-on-month growth), according to @AIB
4.9%
The estimated annual rate of inflation in August, according to @CSO
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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.
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