Renatus’ Weekly M&A Newsletter – 03/01/2021
January 3, 2021Renatus’ Weekly M&A Newsletter – 31/01/2021
January 31, 2021
Renatus Weekly M&A & Company Performance Newsletter 07/02/2021
Dear Reader,
Please find below this week’s newsletter covering the latest M&A, company performance, fundraisings and executive moves.
M&A ACTIVITY
AcadiaSoft acquires Quaternion
Deal Details: AcadiaSoft Inc., a leading industry provider of risk and collateral management services for the derivatives community, has acquired capital markets consulting and software company Quaternion, for an undisclosed sum.
In conjunction with the transaction, which adds significant depth to AcadiaSoft’s risk product offerings, a new Quaternion division has been created, which will focus on providing derivatives market participants with a wide range of Analytics and Expert Services.
Following the acquisition, these services will be an integral part of the AcadiaPlus platform and the Quaternion division will continue to be led by its co-founders, CEO Donal Gallagher and CTO Roland Lichters. Quaternion was owned by its founders and management team.
Advisers: None mentioned.
Renatus Comment: AcadiaSoft had previously partnered with Quaternion on multiple products within the Risk Suite and this acquisition will see AcadiaSoft bringing this offering in house.
Source: AcadiaSoft
Digisoft completes MBO
Deal Details: A management buyout at Cork-based Digisoft has been completed, for an undisclosed sum.
The management buyout was led by Digisoft CEO Fearghal Kelly, who has been with the company since 2012.
Digisoft, which sells software services for set-top boxes and on-demand streaming services to telecom companies, has also increasingly focused on developing solutions using technologies such as virtual reality/augmented reality in recent years.
Advisers: Grant Thornton’s Jim Mulqueen provided corporate finance advice to Pat McDonagh.
Renatus Comment: Serial tech investor and Riverdeep founder Pat McDonagh was the company’s largest shareholder with a c. 40% interest in the business and has exited as part of the buyout. McDonagh, a former schoolteacher turned serial tech investor has built up a multimillion-euro fortune from companies that include CBT Systems, Skillsoft and Riverdeep, as well as property deals.
Source: Irish Times
King & Fowler is acquired by Aero Services Global Group
Deal Details: Liverpool-based King & Fowler, one of the oldest surface treatment houses in the UK, with a particular focus on the aerospace industry, has been acquired by Manchester-based Aero Services Global (“ASG”).
Manchester-based Aero Services Global Group manufactures and sub-assembles detail airframe structural equipment and aero engine components. It employs over 350 people with annual sales of over £43m. The business is run by Simon Weston and backed by Amin Amiri of a2e Industries.
Advisers: A HNH deal advisory team, led by Richard Moorehead, advised King & Fowler on its sale to Aero Services Global Group (ASG).
Renatus Comment: The moves expands ASG offering to its aviation customer base and safeguards the future of the operations of King & Fowler and its 59 employees. With the Covid turmoil in the aviation secure, it is not just the airlines that will feel the pain. Their supply chain partners are also under pressure. There will be more consolidation to come at the end of the aviation supply chain over the coming months.
Source: HNH
Jazz Pharmaceuticals set to acquire GW Pharmaceuticals
Deal Details: Dublin head-quartered Jazz Pharmaceuticals has acquired GW, a cannabis-focused drug company for $7.2 billion (c. €6 billion) in cash and stock.
Jazz Pharmaceuticals plc is a biopharmaceutical company that is dedicated to bringing life-changing medicines to people. Jazz is based in Dublin and has a manufacturing plant in Athlone.
GW is a global leader in discovering, developing, manufacturing and commercializing novel, regulatory approved therapeutics from its proprietary cannabinoid product platform to address a broad range of diseases.
Advisers: Evercore and Guggenheim are serving as lead financial advisors to Jazz Pharmaceuticals, and Evercore is acting as debt advisor. Jazz Pharmaceuticals also received financial advice from BofA Securities and J.P. Morgan Securities LLC. Wachtell, Lipton, Rosen & Katz, Macfarlanes LLP. Arthur Cox LLP, led by Michael Coyle (Corporate and M&A), Fintan Clancy (Tax) and Stephen Ranalow (Corporate and M&A) are serving as legal advisors.
Goldman Sachs & Co. LLC and Centerview Partners LLC are serving as financial advisors to GW Pharmaceuticals plc and Cravath, Swaine & Moore LLP and Slaughter and May are serving as legal advisors.
Renatus Comment: There is a global influx of capital into the medicinal cannabis space as the legalisation of cannabis opens up a new area of development in the global pharma market. Ireland is also moving with the times and last month Health Minister Stephen Donnelly shared that the HSE Service Plan for 2021 includes a Medicinal Cannabis Access Programme.
Source: Jazz Pharmaceuticals
AER Rents acquires Mainline Hire Group
Deal Details: Tool and plant hire specialist Mainline Hire Group has been acquired by AER Rents – part of Dublin’s O’Flaherty Holdings Group. Deal details were not disclosed.
AER bought the business, based in Swadlincote, Derbyshire, from Keith Williams and Carole Poynton.
Mainline will continue to function as a standalone brand within AER Rents, with all 34 employees staying on, including the two founders.
O’Flaherty Holdings dates back to the 1940s, founded by businessman Stephen O’Flaherty. Its core trade is in the motor industry (Mercedes commercial vehicles and cars, among others) which turned over c. £267m in 2019, but its interests have broadened into other areas. Including this burgeoning hire business. The business is ultimately controlled by the O’Flaherty family, though a Maltese structure.
Advisers: AER received corporate finance advice from David O’Kelly and Frank Dunne in KPMG Dublin and legal advice from Alice Rees. Isabelle Munyabarenzi, Paul Hinchliffe and Melanie Morton of Nelsons law firm in the England.
Renatus Comment: The O’Flaherty group first invested in plant hire in 2014, with the acquisition of London-based Mr Plant Hire. In 2019, it also acquired Ireland-based Drogheda Hire & Sales (advised by Grant Thornton’s Paddy Dillon and Tommy Roche). Each business retains its identity, while capitalising on the strengths of their collective offerings and reach across the UK and Ireland.
Source: AER Press Release
DP Energy sells majority stake to Iberdrola
Deal Details: Spanish energy giant Iberdrola has acquired a majority position in Cork-based DP Energy’s Irish offshore wind power business.
As part of the deal, the Spanish company will take control of DP Energy’s offshore wind pipeline of projects, which totals three gigawatts across three projects on the east, west and south coasts of Ireland.
Once operational, the three offshore developments will generate enough energy to power the equivalent of 2.6 million households in Ireland.
DP Energy company is a private limited company with the controlling shareholdings being held by Maureen De Pietro and Simon De Pietro.
Advisers: KPMG provided corporate finance and tax advice led by Mike Hayes to DP Energy.
Renatus Comment: The 3GW pipeline of projects represents a very meaningful contribution to Ireland’s target of 5GW in offshore renewables before 2030, and its Climate Action Plan target of 70% renewable electricity by 2030.
Supporting post-2030 Government aspirations of 30GW of offshore renewables, the new Iberdrola-DP Energy joint venture will also be responsible for developing future offshore wind pipeline in Ireland.
Source: DP Energy Press Release
DEALS IN THE MAKING
SpotOn Energy makes merger offer to Providence Resources
Norwegian energy company SpotOn Energy is reported to have made a merger offer to Irish exploration company Providence Resources. The pair are already partnering in the development of the Barryroe oil and gas field, off the shore due south of Cork.
Source: Business Post
China Mobile emerging favourite to acquire Digicel’s Pacific operations
After Digicel confirmed in December that it received several unsolicited takeover approaches for its Pacific operations, it is reported now that China Mobile is favourite among its potential suitors to acquire the operations. Digicel’s Pacific operations include Papua New Guinea and more than a dozen smaller nations, but they are attractive to potential bidders given the dominant market share it has and it is reported that it could be valued at more than $1bn.
Source: Business Post
Former Paddy Power boss preparing to float Auction Technology Group
Breon Corcoran is reported to be preparing to float Auction Technology Group (ATG), said to be valued at £600 million, on the London stock market. Corcoran is chairman of the company, which runs auction marketplaces around the world, including the highly-successful the-saleroom.com.
Source: The Sunday 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
Ladgroves Stores, which trades as Moriarty Group, operates three SuperValu supermarkets in Palmerston, Balbriggan and Skerries as well as two hotels (Courtyard Hotel and Bracken Court Hotel). There is also a residential and commercial property development arm to the group.
During FY19 Ladgrove Stores saw turnover decline slightly by c. 1% to c. €52m. Meanwhile, EBITDA declined by c. 41% to €2.6m for the period. The EBITDA decline can be traced to a roughly 3 percentage point drop in gross margins to 32%.
Cash increased by c. €784k during the period to end at €3.85m, in large part due to the sale of investment properties and property plant and equipment sales which resulted in a net cash inflow from investing activities of c. €2m. The major cash drains during the period were a c. €1.7m working capital investment and c. €1.38m in loan repayments. At the period end the group had c. €16m in debt outstanding.
The business employs a total of 436 staff at an annual cost of c. €8.9m and is owned by the Moriarty family.
Paddywagon Limited is primarily a tour bus operator, hostel operator and tourism merchandise supplier based out of Dublin. The business was founded in 1998 and offers day tours, multi-day tours and private tours around Ireland.
Turnover and EBITDA grew by 13% and 8% during the period, to end at c. €14m and €1.9m, respectively.
Cash increased by c. €585k for the period bringing the closing balance to c. €2.1m. The big drains on cash were the c. €1.15m in debt payments and the c. €485k in capital expenditure for the period. These were partially offset by a c. €810k inflow from fixed asset sales.
The business employed 188 staff for the period at an annual cost of c. €3.5m. The business is ultimately owned by Cathal (Charlie) O’Connell.
RECENT FUNDRAISINGS
Who: Mindstone, a London-based education technology start-up has raised funding.
What: Mindstone raised £1.16 million (€ 1.83 million). The funding round was led by Moonfire Ventures. The Fund, Zanichelli Venture & Nex.D also participated in the round, as well as a series of angels including former co-founders at SuperAwesome.
Why: The investment will allow Mindstone to build a learning platform that develops people’s interests, skills, and careers through the power of compound learning.
Source: Mindstone
Who: Clubforce, a Galway-based sports software company has secured funding.
What: Clubforce has raised €2.5m led by Mark Gibbs and his team in DHKN. Clubforce is further boosted by the addition of Noel Murray as Chairman of the Board. Noel, a former Microsoft senior executive was Managing Director for Sales Operations in Asia Pacific and Japan brings extensive experience to the company
Why: This investment will be used to double its workforce, which will be spread between its Galway and UK offices, and will also allow Clubforce to accelerate the delivery of an ambitious product roadmap.
Source: Clubforce
Who: Klir, an Irish-founded compliance start-up for water utilities has secured funding.
What: Klir has raised $3.1 million (€2.58 million). Bowery Capital, Spider Capital and SaaS Ventures led the oversubscribed funding round. Alan Ryan (Partner), Michael Bambrick and Graham Coyne of Wallace Corporate Counsel LLP provided legal advice.
Why: The new financing will be used to expand the team at its new facility in Nevada.
Source: Irish Times
Who: Frontline Ventures, a Dublin-based early-stage venture capital firm, has announced a new fund.
What: Frontline has announced a €70m ‘Seed Fund III’. Its investors include AIB, ISIF and the European Investment Fund.
Why: The new fund will offer between €250,000 and €2.5m to early-stage start-ups.
Source: Irish Independent
Who: Construction tech company GoContractor has raised funding.
What: The firm raised $5 million (€4.2 million). Boston-based Building Ventures led the Series A round, with Ironspring, a Texas-headquartered venture capital firm, also participating.
Why: GoContractor is to relocate its headquarters from Dublin to the US to take advantage of opportunities there following the fundraise.
Source: Irish Times
Who: Belfast-based Concept Apps Ltd, trading as TeamFeePay, a sports management platform that supports clubs with membership registrations, payments, financial governance and a whole host of other services that sports clubs currently require (such as Covid 19 Track and Trace). The business is led by its founder and primary shareholder, Liam McStravick
What: The business has received a seed investment of £660,000 from TechStart NI, CoFund NI, and a range of well-respected and industry recognised angel investors.
Why: Operating a SaaS business model, TeamFeePay will use the investment to grow its ARR to approx £2 million in next 12 months. It also plans to focus on accelerating customer acquisition, growing from its current 250 customers (and 30,000 weekly users) through to 1,000 customers (and 125,000 weekly users).
Source: TeamFeePay
Who: Blockaviation, a tech business led by John Roberts that is building a global digital register for aviation records using blockchain.
What: The startup has taken in investment from former Aer Lingus CEO Dermot Mannion. The size of the investment was not reported.
Why: Expected to be used in the continued development of the business.
Source: Business Post
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.
THOUGHT FOR THE WEEK
Business owners are increasingly looking at how best to extract cash efficiently from their companies given the probable tightening of public finances in the future and possible shift in ethos at Government level.
There is a view among business owners in the South, that while the 10% CGT rate for entrepreneurs is available on the first €1m of a gain, let’s move now and try and get it. However, this is not always so simple and we have seen a few cases recently where there was innocent cases that did not qualify as they were marginally outside of the qualifying criteria.
In one such case the person owned 4.5% not the required 5%.
In another, the spouse who held 25% worked in the company, but held another employment accounting for >51% of their time and earnings, and the spouse did not qualify as a result.
In another, the individuals shares were not held for three years.
In another, there was a dormant irrelevant company in the group structure which resulted in non adherence to the qualifying criteria.
It is worth anyone thinking of availing of the 10% CGT rate (as opposed to the punitive 33%) reading the attached revenue CGT paper and discussing in detail with your tax advisor.
Renatus are in talks with a number of entrepreneurs and would love to talk to more about giving them some chips-off today and allowing them avail of this exemption, while also going on a 3-10 year journey with us to maximise the potential of the business ahead of a full exit. We can bring a lot to the table that can help realise the future potential of the company and, in turn maximise its value.
@RenatusCapital Tweets
5.6%
The month-on-month percentage point rise in the Covid-adjusted rate of unemployment for January 2021, with unemployment rising to 25% for this period when compared to 19.4% in December 2020. According to @CSOIreland
73%
The year-on-year rise in the sum of venture capital (VC) investment Irish companies received in 2020, amounting to €806m investments across 226 deals. According to @KPMG . @ExaminerBiz
-4.8%
The year-on-year decline of seasonally adjusted GDP in the EU for Q4 of 2020, when compared with Q4 of 2019. According to a preliminary flash estimate by @EU_Eurostat
1.7%
The year-on-year rise in the net worth of Irish households in Q3 of 2020, amounting to an all-time high of €831 billion. According to @centralbank_ie . @IrishTimesBiz
17.8%
The year-on-year decline in new Irish car registrations for January 2021, with 25,191 registrations in January of this year down from 30,650 in January 2020. According to @SIMI_IE . @RTEbusiness
51.8
The AIB IHS Markit manufacturing Purchasing Managers’ Index (PMI) for January 2021, down from 57.2 in December. Anything above 50 indicates expansion. @RTEbusiness
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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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