Cross Rental Services acquires Acclimatise, MML to acquire CG Ireland, Pathfinder is acquired by Sia Partners, Draper Esprit sells portfolio company to Zynga Inc, Keywords Studios acquires Coconut Lizard & much more in this week's Renatus M&A Newsletter.
Renatus Weekly M&A & Company Performance Private Equity Newsletter 05/07/2020
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.
Cross Rental Services acquires Acclimatise
Deal Details: Cross Rental Services, which is backed by private equity firm Lonsdale Capital Partners, has acquired Acclimatise Limited for an undisclosed fee.
Dublin-headquartered Cross, led by CEO Graeme Nesbitt, is one of the largest players in the specialist chiller, boiler, heating and air conditioning rental market across Ireland and the UK.
Based in Stoke, Acclimatise is a leading HVAC rental provider that specialises in industrial boiler hire, chiller rental, air handling and air conditioning, power generation and heating.
Acclimatise will be rolled into Cross’s Temperature Control division and follows Swegon Hire, which was incorporated into the same division following its acquisition in November 2019.
Advisors: None mentioned.
Renatus Comment: Lonsdale’s portfolio companies are no strangers to bolt-on strategy and this acquisition is likely to create significant added value to Cross Rental Services. A larger rental fleet as well as access to a 4,200m2 Northern UK depot will increase the company’s capacity to deliver around the clock service all year-round.
Source: Lonsdale Partners
MML to acquire CG Ireland
Deal Details: MML Growth Capital Partners Ireland (“MML”) has agreed a deal to acquire controlling stake in CG Power Systems Ireland Limited (CG Ireland). The financial consideration of the deal was not disclosed and it is subject to approval from the Competition and Consumer Protection Commission.
CG Ireland, founded in 1977 and currently led by Stephanie Leonard, is a Cavan-based manufacturer of distribution transformers. The company was formerly part of the Avantha group which is now facing liquidation. In the company’s financial year to March 2019, they recorded revenue of c. €60.3m which is reported to have grown to c. €70m this year.
The investment will position MML as the largest equity holder along with current company management. It has also repotedly resulted in the continuance of 400 jobs.
Advisers: Michael Neary and Paul Murray of Grant Thornton provided valuation services on this transaction.
Renatus Comment: When you see the transformers around electricity substations you would assume they came from abroad but the likelihood is they were manufactured across from the McDonalds on the way into Cavan town in the big CG plant.
The Company goes head to head with companies like Schneider, Siemens, ABB and other global giants.
As ever with a transaction of this nature, the company will have challenges decoupling from bigger entity but at least as much opportunity from being released from the constraints of parent company practices.
Source: MML Press Release
Pathfinder is acquired by Sia Partners
Deal Details: Sia Partners, a global management consultancy, has acquired Dublin-based consulting group Pathfinders from its six partners for an undisclosed sum. The partners, who all owned an equal share, will continue to work with the business.
Pathfinder has 40 consultants based in Ireland with a further 10 in Edinburgh. Existing clients include listed clinical research group Icon, Agri & retail business Dairygold and hotel operator, Dalata.
Sia Partners, which has 1650 consultants worldwide, plans on growing this existing client base as well as doubling the size of the business by 2023, adding a further 60 staff.
Advisers: IBI Corporate Finance team led by James Doody and assisted by Nicholas McGovern acted for Pathfinder from a corporate finance perspective. Brian McCloskey, assisted by Enda Garvey and Robert Maloney Derham from Matheson advised Pathfinder on the legals.
Renatus Comment: It is unlikely that Sia Partners’ sole objective in this acquisition is to improve its service for existing blue-chip clients. Over the coming years we can expect the firm to compete with the established, big four management consultancy providers.
A lot of professional services firms question is there any goodwill in their business independent of themselves and deals like this should show there is if they build their business in a way that can appeal to a buyer.
Draper Esprit sells portfolio company to Zynga Inc
Deal Details: Dublin-listed venture capital firm Draper Esprit is set to receive about £88m in total from the sale of its portfolio company.
Draper Esprit will receive c. £39m (€43m) in cash, with the remainder in shares, following the sale of its portfolio company, Peak Games to Zynga Inc for a total of €1.64bn. The remaining balance of shares in Zynga are to be held subject to a further six months lock-up.
Peak Games is a Turkish games company that develops various online mobile card games including Toy Blast and Lost Bubble-Bubble Shooter with millions of players across 193 countries.
Zynga is the NASDAQ listed developer of the extremely popular online game, Farmville.
Advisors: None mentioned.
Renatus Comment: The sale represents a significant return and a welcome injection of liquidity for the Dublin-listed venture capital company. Draper Esprit’s orginal investment value was not disclosed but Zynga’s share price indicated that their holding was valued at c. £88m which reportedly represents a significant return for the group.
Source: Irish Times
Keywords Studios acquires Coconut Lizard
Deal Details: Keywords Studios, Dublin-based and London-listed acquisitive video game specialist, has acquired Coconut Lizard for €2.2m.
The deal is Keywords’ first acquisition since it raised £100m (c. €109m) last month in a UK shares placing. CEO Andrew Day expects further acquisitions over the coming months.
Based in England and founded by gaming veteran Robert Troughton, Coconut Lizard is a well-regarded provider of game development engineering services. Coconut Lizard generated revenues of over £1.5 (c.€1.6m) and an EBITDA of £350k (c. €382k) in its latest fiscal year.
Advisers: None mentioned
Comment: Keyword Studios is a very familiar entrant in our weekly roundup. The company has aggressively and consistently bolted-on companies over the past number of years, bringing with them new geographies and competencies.
Keywords recently raised £100m and will likely look to put it use on further acquisitions.
Source: Keywords Studios
Nostra acquires Brandon Global IT
Deal Details: Dublin-based managed service provider Nostra has acquired cyber risk and compliance specialists Brandon Global IT for an undisclosed sum. The deal was funded by Bank of Ireland together with Nostra funds.
Nostra was established in 2006 by brothers Kevin and Barry O’Loughlin along with Gary Byrne and Senan Finucane and has grown rapidly in the last number of years. The business provides support in the areas of data infrastructure, managed IT services, cloud and security. The acquisition of Brandon Global will now see the company’s turnover expected to rise from €14 million to €18 million. Nostra reported an EBITDA of €880,000 for year-end, 2019.
Brandon Global has been providing IT services since 1998 in the form of IT support such as technical helpdesk support, IT projects and consulting services to growing and established businesses. Today it operates from three locations in Galway, Dublin and New York.
Advisers: None mentioned
Renatus Comment: Nostra have ambitious plans, targeting revenues of €50m within the next 5 years. This is Nostra’s third acquisition in the past 5 years. As IT infrastructure becomes more prevalent in Irish SMEs, service providers such as Nostra stand to benefit.
Nostra and Brandon had worked together pre-deal and bringing Brandon’s services in into Nostra makes a lot of sense for them. By bolting-on new services, they can become a more critical supplier to their customers, increasing their embeddedness and making their position more secure as customers will use fewer suppliers.
DEALS IN THE MAKING
Arthopoda Ltd is to acquire a shareholding in Brindley Healthcare
Arthopoda Limited is to acquire a 50% stake and joint control of Brindley Healthcare Limited. Arthopoda Limited is a newly created acquisition company that is indirectly owned and controlled by Orpea S.A. Orpea is a leading European operator focused on the provision of residential care with nursing homes in over 22 countries.
Brindley Healthcare, founded in 2000 by Ms. Amanda Torrens, is one of the leading providers of residential care in Ireland. It currently operates 6 HIQA registered residential care homes in Donegal, Galway, Mayo and Kildare.
Iconic Labs interested in Maximum Media
As was previously reported, UK-based Iconic Labs is one of the parties interested in acquiring Irish-based Maximum Media and its sister company responsible for Joe.co.uk, which are in examinership and administration respectively.
Iconic Labs had made a bid for the brands last month in conjunction with Greencastle Capital and have this week clarified that Maximum Media founder Niall McGarry was not involved in the bidding group.
Source: The Sunday Times
Liquidators appointed to Drumcondra Credit Union
The High Court has agreed to appoint provisional liquidators to Drumcondra Credit Union in Dublin.
The credit union, with around 5,000 members and savings of c. €13m, has reportedly struggled for a while to build up its capital to satisfactory regulatory levels.
The members, whose savings are covered by the State Deposit Guarantee Scheme, do not have to take any action themselves as compensation payments will automatically issue by cheque to all duly verified depositors.
Activist fund builds stake in Glenveagh Properties
Activist, a Swiss-based hedge fund Teleios Capital Partners, has taken a 9.3% stake in Irish homebuilder Glenveagh Properties.
Teleios has reportedly been building a stake in Glenveagh since March and in the space of 3 days this week increased its holding from c. 6% to c. 9.3%. Glenveagh’s share price closed at €0.69 on July 3rd, down from a high of €1.25 after its IPO in late 2017.
Teleois has not made any official statement on its stake but usually positions itself as a buy-and-hold investor.
Source: The Sunday Times
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.
Based in Ballymena, Co. Antrim, McKeown Fine Foods is a meat & poultry processor and distributor. Its primary products are breaded and battered chicken fillets and goujons for the wholesale trade.
In FY19, the company saw revenue increase by 10.5% to c. £15.5m but EBITDA decreased by 20.8% to c. £0.9m. This was due to an increase in the cost of sales which drove gross margins down from c. 11.8% to c. 10.2%. There was a net cash increase of c. £350k with working capital being the biggest drain on cash as seen in the table.
The company employed an average of 112 employees in FY19 at a cost of c. £2.2m. The company is owned by Arthur (20%) and Damian (80%) McKeown.
Based in Dublin, Datajan Holdings Limited is a non-trading holding company for a number of distribution companies that wholesale motor parts, engineering parts, welding equipment and ironmongery products. Subsidiary companies include AEF Ltd, Strongline Autoparts and John Lawson Distributors Ltd, among others.
In FY19, the company saw revenue increase marginally by 1.0% to c. €18.3m while EBITDA also increased by 1.6% to c. €1.4m. The company had a net cash decrease of c. €10k after loan repayments of c. €330k and fixed asset purchases of c. €385k consisting primarily of motor vehicle purchases. It also paid a c. €100k dividend during the year.
The company employed an average of 74 employees during the year at a cost of c. €3.2m. The company is owned by David (80%) and Carol (10%) MacNeaney and Jennifer Healion (10%).
Based in Co. Cavan , Wilton Waste Recycling Ltd trading as Wilton Recyling is family run Recycling, Waste Management and Scrap Metal company.
In FY19, Wilton Recycling saw revenue decrease by 5.2% to c. €19.5m while EBITDA also decreased 7.4% to c. €2.4m. c. 49% of revenue was generated from the ROI with the remaining c. 51% from the UK.
Net cash decreased by c. €45k to leave and ending balance of c. €1.2m. The most significant drain on cash was the c. €1.5m spent on property, machinery, and fittings. c. €500k of dividends were also paid out during FY19.
The company had 50 employees in FY19 at a total cost of c. €1.9m. Rodney Wilton owns 100% of Wilton Waste Holdings Ltd which owns Wilton Waste Recylcing Limited.
Who: Irish film development agency Screen Ireland announces a Strategic Slate Development Fund.
What: A total of €3.2m will be shared between 26 production companies. Dublin-based Element Pictures and Kilkenny-based Cartoon Saloon will receive the most funds of €200,000 each.
Why: The slate funding, which is the equivalent of research and development, is to help production companies develop a strong slate of projects to scale-up production activity when the crisis brought on by the Covid-19 pandemic is over.
Source: Irish Times
Who: Toytown, a Belfast-based independent toy retailer has secured debt funding.
What: £1.5m (€1.65m) loan is provided by Bank of Ireland through a combination of its own business support measures and UK Government-backed schemes – including Bounce Back Loan Scheme and the Coronavirus Business Interruption Loan Scheme through which Toytown secured funding.
Why: The funds will be used to support cashflow, pay suppliers and ensure the business is ready for re-opening as coronavirus related restrictions are lifted.
Source: Belfast Telegraph
Who: Wexford-based online logistics company Scurri secures further funding.
What: €1.5m comes from London-based Episode 1 Ventures, Irish VC Act Venture Capital and PA Nolan, an Irish tech veteran. This brings their total funding to €8.5m to date.
Why: The funding is needed to accommodate the 55% spike in delivery volumes due to the Pandemic. These additional funds will directly be allocated to recruiting new hires across key areas of the business and to expand into new markets.
Source: Irish Times
Who: Belfast-based tech company AquaQ Analytics, which specialises in analysing big data, has secured funding.
What: Invest NI, Northern Ireland’s economic development agency has invested £861K (c. €950k)
Why: The funding is part of a wider £8.3m (c. €9.2m) investment by the company that will drive diversification into new sectors and add 123 new jobs, doubling its workforce.
Source: Belfast Telegraph
Who:Rove, an Irish travel-tech start-up founded by former Fitbit executive Brian Kearney has raised seed funding. The company has developed a cloud-based software platform that allows consumers to book adventure travel experiences.
What: €450k seed funding is led by Zoosh Ventures and Enterprise Ireland.
Why: The Investment will be used to further commercialise the business and place Rove in a position to take advantage of a projected surge in adventure tourism post Covid-19 restrictions.
Source: Irish Times
Who: Rosslare Europort has secured investment under a new development plan. It is the closest port to the UK and mainland Europe offering daily and weekly direct services to Britain, France and Spain.
What: Irish Rail is investing €30m over the next 5 years into developing the infrastructure.
Why: The money will be used for building a sustainable, seamless and smart port. The port will be Brexit-ready and aims to be best in class internationally.
Who: Hotels group iNua is raising funds. The group owns a number of properties across Ireland including Radisson hotels in Cork, Limerick, Sligo and Athlone, among others.
What: The group is reportedly raising c. €10m in fresh capital in the form of subordinated debt being arranged by BlackBee Investments. Deloitte Partners Ronan Murray and John Doddy are advising iNua.
Why: The funds will be used to stabilise the business in light of a downturn in trading brought on by covid.
Source:The Sunday Times
Who:Openet Telecom, the billing software specialist that provides charging, policy and data management solutions, has raised funds.
What: It has been reported that existing backers including Barry Maloney and Cipio Partners led a €4m funding round last year which also included Openet co-founders Niall Norton and Joe Hogan.
Why: The use of funds was not disclosed, however, Openet sees itself as well positioned to help telcos bill for 5G services which will be coming online over the next couple years.
Source:The Sunday Times
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.
We recently re-read a passage from Machievelli The Prince. It effectively says that the clever princes always had enough food and men to last a year of lockdown. One wonders will recent experiences change the propensity to take on debt among business leaders leaving more headroom to fight off any surprises. The message went as follows:
“It is necessary to consider another point in examining the character of these principalities: that is, whether a prince has such power that, in case of need, he can support himself with his own resources, or whether he has always need of the assistance of others. And to make this quite clear I say that I consider those are able to support themselves by their own resources who can, either by abundance of men or money, raise a sufficient army to join battle against any one who comes to attack them; and I consider those always to have need of others who cannot show themselves against the enemy in the field, but are forced to defend themselves by sheltering behind walls. The first case has been discussed, but we will speak of it again should it recur. In the second case one can say nothing except to encourage such princes to provision and fortify their towns, and not on any account to defend the country. And whoever shall fortify his town well, and shall have managed the other concerns of his subjects in the way stated above, and to be often repeated, will never be attacked without great caution, for men are always adverse to enterprises where difficulties can be seen, and it will be seen not to be an easy thing to attack one who has his town well fortified, and is not hated by his people.”
“The cities of Germany are absolutely free, they own but little country around them, and they yield obedience to the emperor when it suits them, nor do they fear this or any other power they may have near them, because they are fortified in such a way that every one thinks the taking of them by assault would be tedious and difficult, seeing they have proper ditches and walls, they have sufficient artillery, and they always keep in public depots enough for one year’s eating, drinking, and firing. And beyond this, to keep the people quiet and without loss to the state, they always have the means of giving work to the community in those labours that are the life and strength of the city, and on the pursuit of which the people are supported; they also hold military exercises in repute, and moreover have many ordinances to uphold them.”
The Bank of Ireland Economic Pulse reading for June 2020, up by 12.4 points on May’s reading but lower than June 2019’s 90.7. @IrishTimesBiz
The year-on-year drop in the Irish house prices for Q2 2020 amounting to an average asking price of €268,000. In Dublin, the average asking price was €372,000, according to the report by MyHome.ie/Davy. @IrishTimesBiz
98.4% & 98.0%
The year-on-year fall in the number of Irish overseas air & sea arrivals and departures, respectively, for May 2020, amounting to 28,300 arrivals and 36,300 departures, according to @CSOIreland
The COVID-19 adjusted unemployment rate for June 2020, if all claimants of the Pandemic Unemployment Payment were classified as unemployed, according to @CSOIreland
29.5% & 28.4%
The month-on-month increases for retail sales volume and value indices, respectively, for May 2020. On annual bases they were 26.6% & 29.1% lower, according to @CSOIreland
The year-on-year increase in the online shopping spend in Ireland in the 12-week period to June 14 amounting to an extra €70,9m spent a year ago, according to Kantar survey. @IndoBusiness
The AIB Purchasing Managers’ Index for June 2020, showing manufacturing activity has grown 11.8 points from May. A reading above 50 signifies growth. @IrishTimesBiz
The year-on-year decline in new car registrations in Ireland for June 2020, according to SIMI. @irishexaminer
The total number of people in Ireland on live register for June 2020. This includes people in receipt Covid-related payments, down by c. 151K month-on-month, according to @CSOIreland
The year-on-year reduction in the monthly services index value for May 2020 with the most notable changes in the Wholesale & Trade (+7.7%) and Administrative & Support Service Activities (-14.9%), according to @CSOIreland
Renatus was established in 2014 by Mark Flood and Brendan Traynor 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 of €5m and above. Our typical solutions include: