InsightsNewsletterRenatus’ Weekly M&A Newsletter – 05/01/2020

Renatus’ Weekly M&A Newsletter – 05/01/2020

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Dear Reader,

You are receiving this mail every week as we see you as a key partner and we look forward to continuing to enjoy our journey with you over the decades ahead.

Please find below this week’s newsletter covering the latest M&A, company performance, fundraisings and executive moves.

M&A Activity

Artomatix acquired by a Silicon Valley company

artomatix

Deal Details: Artomatix, an Irish software company has been sold in a deal valued at up to $60m (€54m). The buyer’s name is yet to be announced however the industry sources have hinted it is a well-known Silicon Valley-based company.

Artomatix was founded by Dr Eric Risser and Neal O’Gorman in 2014. The company developed (AI) technology that can automate the creation of 3D content.

The transaction brings a significant return for Artomatix’s backers, which include Sure Valley Ventures and Enterprise Ireland.

Advisers: Focus Capital Partners provided sell-side support to Artomatix.

Renatus Comment: This transaction represents a major success for all involved in the Artomatix project, especially Dr Eric Risser (Co-founder). The company has developed AI software technology, the world’s first 3D art engine, that is believed to have the potential to significantly change every industry exposed to 3D content and significantly reduce costs of content creation.

Ireland is a rising star in terms of AI technology with a recent study by LinkedIn revealing that half of Europe’s AI workers are based in just three countries: the UK, France and Germany. But, on a per capita basis, Ireland is by far the top nation for AI talent which has been linked to a number of factors, including the high number of tech companies that have established centres on data analytics, machine learning and big data locally. Ireland also ranks 10th on ‘The Global AI Index’ which benchmarks 54 nations on their level of investment, innovation and implementation of AI and puts them just marginally one place behind Japan.

Source: Irish Times

Tesco Ireland transfers filling stations to DCC

dcc

Deal Details: Tesco Ireland has confirmed a deal to transfer the operation of its fuel business in Ireland to DCC Retail & Oil, subject to clearance by the Competition and Consumer Protection Commission. Tesco’s 22 filling stations are located in Dublin, Leinster and Munster. Tesco will begin to transfer the filling stations in the first quarter of 2020.

Advisers: None mentioned

Renatus Comment: DCC floated in the UK in 1994 and since then has delivered a truly staggering track record of growth, namely:
(1) A 25-year operating profit growth compound annual growth rate (“CAGR”) of 14.6%
(2) A 25-year average free cashflow conversion rate of 101%; and
(3) Total shareholder returns of of 6,698% over the last 25 years.

Acquisitions have been a crucial element of delivering that growth with c.£3bn being spent on  over 270 acquisitions in the last 25 years.

SourceShelf Life

Investor Consortium take control of Framespace

frame

Deal Details: A group of investors which includes Paul Connolly and Michael McElligott are reported to have completed the takeover of Framespace Solutions, a Roscommon-based company that supplies modular buildings used in hotels and residential schemes.

It’s reported that the new owners intend to invest in expanding the business.

McElligott is a co-founder and chief executive of Tetrarch Capital and Connolly owns Dublin-based Connolly Capital and chairs Tetrarch.

Advisers: None mentioned

Renatus Comment: This follows BAM Ireland’s investment into modular housing with its acquisition of a stake in Modern Homes Ireland at the beginning of 2019. As we continue to build more houses there is increasing levels of resource constraints evident within the industry. Modular housing is more and more likely to become a feature of the market given the speed, efficiency and cost benefits associated with it, ultimately leading to the delivery of more affordable housing units. It is possible that this technology will be used to deliver units within some of the news owners existing land bank.

Source: Sunday Times

Healthcare 21 acquires Xograph Healthcare

hc

Deal Details: Cork-based medical products distributor Healthcare 21 Group has completed the acquisition of British imaging equipment supplier Xograph Healthcare. Deal consideration wasn’t disclosed.

Xograph was founded in 1967 and is one of the largest independent medical equipment suppliers in the UK and Ireland with contracts to supply NHS and HSE hospitals, private clinics and diagnostic centres.

Healthcare 21 Group, founded and chaired by Owen Curtin, expects the acquisition to accelerate the company’s push into Europe.

Advisers: None Mentioned

Renatus Comment: Latest accounts for Xograph are for the period ending June’19 and show the company generated an EBITDA of c. £2.17m off turnover of c. £9.9m. Prior to the transaction Xograph was entirely owned by Pankaj Krish Soni.

Source: Xograph Press Release

Executive and Board Appointments

We in Renatus believe that more important than the deals are the people and we have teamed up with leaders in this field Korn Ferry to provide you with details of key recent executive and board level appointments.

Acorn Life appoints new CEO
Keith Butler has been named as CEO of life assurance company Acorn Life. With over 20 years’ experience in the financial services industry, he is a qualified actuary and a qualified financial adviser. He has been Acorn Life’s sales director for the past 11 years and has been a non-executive director of Acorn Insurance for six years.  Prior to Acorn, Mr Butler spent 5 years at Irish Life where he trained as an Actuary.  He is a graduate of UCD.

Rotunda Hospital appoints new Governor
The Rotunda Hospital has appointed Lucinda Woods as Governor.  Ms Woods is a former senior executive at The Restaurant Group plc and Paddy Power Betfair.  She is a Chartered Accountant having trained at KPMG.  Ms Woods previously worked at Investec in Corporate Finance in her earlier career.  She has graduate of the University of Oxford and completed an MBA at Harvard University.  Ms Woods is a Fulbright Scholar.

Horseware Ireland appoints new CEO
Mark Saunders has been appointed as CEO of Horseware Ireland, the producer of branded equestrian and pet products including rugs, clothing, therapies and accessories. He joined the company as chief commercial officer in 2017 from Bewley’s where he was group brand director and prior to that he held senior management and leadership roles in Dairy Crest plc, IAWS Group plc and Superquinn. He takes over from CEO and founder Tom MacGuinness, who will become executive chairman.

Elkstone appoints senior Business Development executive
Edward Yusko has been appointed to oversee business development with office investment group Elkstone. He has over 30 years’ experience in high growth Financial Services and Technology companies, both in the US and Ireland.  He has worked in senior roles with Merrill Lynch Private Client Group in Beverly Hills, California, and more recently Bank of Ireland Private Banking and Key Capital Private in Dublin. Mr Yusko has advised senior executives of major corporations, entrepreneurs, business owners, and top professionals. He studied Engineering and Computer Science at Cornell University.

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.

dmg
dmg-figs

Based in Dublin, DMG Engineering Limited have been in operation since 2004 and are specialists in the area of commercial mechanical, electrical and air conditioning installations while also providing planned preventative maintenance. The company had a very successful year in FY19 which saw revenue increase by 43.6% to c. €36.7m while EBITDA also increased by 19.1% to c. €3.1m. The company employed an average of 80 people during the year at a cost of c. €3.8m. Net cash increased by c. €1.7m after significant working capital movements, freeing up c. €1.4m, as well as the purchase of fixed assets amounting to c. €363k and recorded a loss on disposal of financial assets of c. €84k. The company also paid a dividend of c. €2m and made a c. €70k payment of finance lease obligations. Cash on the balance sheet stood at c. €6.8m against a debt balance of c. €19k. Net assets for the year were up 17.7% from the previous year to c. €4.1m. The company is owned by David Malone (47.5%), David McGarry (47.5%) and Sandra Kelly (5%).

oliver st john
oliver figs

Drayton House Holdings Limited owns the Oliver St. John Gogarty pub in Temple Bar as well as a number of other ventures covering hostels, construction and investing. In the group most recent financial year, turnover increased by 2.3% to c. €17.4m while EBITDA decreased by 1.3% to c. €6.2m. Despite better gross margins for the group, admin expenses increased by c. €500k which caused EBITDA to fall slightly. EBITDA converted to a net cash increase of c. €2.1m after c. €2.5m was used to repay loans. At the end of the year, there was a cash balance of c. €14.3m. Drayton House Holdings is owned by Martin and Martina Keane.

marcon
marcon figs

Headquartered in Antrim, Macron Fit-Out is an interior fit-out company that has worked with companies across a variety of sectors including retail, office, leisure and hospitality. Turnover declined by c. 11% in FY19 to c. £29.7m while EBITDA declined by c. 42% to c. £1.9m. Macron employs 58 staff at an annual cost of c. £2.07m per annum. There is minimal CapEx associated with this business with a cumulative c. £45k spend on CapEx in the last two fiscal periods and c. £627k of fixed assets on the balance sheet, £400k of which relates to freehold land and buildings. There is minimal debt on the balance sheet with a total balance of c. £167k against a closing cash balance for the period of c. £2.9m. A dividend of £1.4m was paid to the shareholders during the period. The business is equally owned by Mark McElroy and Mark O’Connor.

Fundraisings

Who: Dublin-based analytics provider MedModus, founded in 2017 and led by Deaglan MagFhloinn, has raised investment.

What: €1m investment was secured through the Davy EIIS fund, a joint venture between BDO and J&E Davy, which allows small investors to claim tax relief on investments in emerging companies. Enterprise Ireland also participated in the fundraise.

Why: The funds will be used towards expanding its sales and delivery teams to meet demand for its solutions.

Source: Irish Times

Who: Private Irish-US accelerator and investment firm Continuous Ventures is looking to raise equity.

What: The company seeks to raise $50m (€44.7m). Its current backers and advisers include former Dragon’s Den star Sarah Newman, GameStop founder Kevin Neary, senior director of research strategy at Google’s AI subsidiary Pilar Manchón, former ACCA Ireland president Tom Murray and Neil Sands, previously a senior executive at Salesforce.

Why: The purpose of the funding is to to back more technology start-ups to help make them “investor ready”. It provides early-stage funding of about €500,000 at seed stage and between €5m and €10m at Series A. It also offers advice and facilitates meetings with strategic investors and industry experts.

Source: Irish Times

Who: eLight, an Irish-founded energy efficient industrial lighting company, is set to float on London’s Alternative Investment Market (AIM).

What: The business plans to float as eEnergy Group following a reverse takeover of AIM-listed firm Alexander Mining. The group has already raised £2m (€2.3m) from investors to fund its growth plans.

Why: The funds raised will be used for business expansion through acquisitions and organic growth.

Source: Irish Examiner

Who: Ireland’s Border region businesses in Donegal, Sligo, Leitrim, Cavan, Monaghan and Louth are to benefit from a new fund.

What: €28m fund has been set up by the Government Minister for Business, Enterprise and Innovation, Heather Humphreys. The fund comprises of €13m Border Economic Stimulus Package and €15m competitive Border Enterprise Development Fund, administered by Enterprise Ireland (EI).

Why: The funding is for helping businesses along the border survive in the wake of Brexit.

Source: Irish Examiner

Who: Scurri, a Wexford-based E-commerce software business which is led by CEO Rory O’Connor. The firms technology is used by online retailers to manage orders, deliveries and returns.

What: The company is expecting to finalise a €1.5m fundraise by the end of the first quarter and intends to raise a further €4m by the end of the year.

Why: Funds are intended to be used to target new business.

Source: Sunday Times

Who: Dr Coy’s Health Foods, a Wicklow-based food company founded by Alison Stroh. The company’s products are in Supervalu, Tesco and Dunnes Stores as well as the UK.

What: The company is seeking to raise €600k as part of a second funding round. It raised €400k in its first funding round, €100k from Enterprise Ireland and €300k from private investors which included Dave “The Edge” Evans and Ali Hewson.

Why: Funds are being used to target international expansion, particularly in the UK and China.

Source: Sunday Independent

Who: Paragraf, a Cambridge University spinout that develops graphene-based electronics products. The company is led Corkman Dr Ivor Guiney.

What: Paragraf has completed a €4m Series A funding round. Backers of the round include Draper Esprit, Amadeus Capital Partners and IQ Capital.

Why: Funds will be used to build the firms team, adding engineers, scientists, a business development specialist and lab technicians.

Source: Sunday Independent

@RenatusCapital Tweets

5.4

The year-on-year drop in the business sentiment index in the Republic for December 2019, falling to a reading of 83, according to the Bank of Ireland Economic Pulse. @rtenews

49.5

The Irish purchasing managers index (PMI) for December 2019, any reading below 50 signals contraction. The reading has been below 50 in 6 of the past 7 months, making it the longest downturn since Q3 2011, according to AIB purchasing managers index. @IrishTimesBiz

1.2%

The year-on-year decrease in the average house prices in Ireland for Q4 2019, making the average cost of a house (including apartments) €250,766. This is the first time the housing prices fell since 2012. @IrishTimesBiz

2% & 7.2%

The year-on-year increase in the mortgage approvals and value of the home loans, respectively, for November 2019, amounting to 4,182 approvals worth a combined €960m, according to Banking and Payments Federation Ireland (BPFI).  @irishexaminer

6.8 & 13.1%

The year-on-year decline in the new car registrations and increase of used imports, respectively, in Ireland for 2019, amounting to 117,100 new cars and 113,926 used car imports registered, according to SIMI. @irishexaminer

6.8%

The year-on-year increase in the Irish tax revenues for 2019, totalling a record €59.3bn, according to Department of Finance. @IndoBusiness

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

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