Renatus Weekly M&A & Company Performance Private Equity Newsletter 07/05/2023

Deal Details: Nostra has acquired Definitive Solutions. Deal consideration was not disclosed.

Nostra is a Dublin-based IT services provider, with other offices in Galway and Cork. The business is majority owned by Kevin O’Loughlin, CEO, who co-founded the business with his brother Barry, Gary Byrne and Senan Finucane. The business’ 2022 turnover is reported to be c. €33m.

Definitive Solutions is an IT support and managed service company, based in Swords, Co. Dublin. It was owned by Peter Meade and Dorothea Lewis. In FY Dec 21 it reported turnover of c. €2.8m which converted to EBITDA of c. €0.1m.

Advisers:

Advisers:
Nostra:
Deal Advisory: Grant Thornton led by Gareth Cosgrove.
Legal: McCann FitzGerald led by Rory O’Malley.
Banking: Bank of Ireland.

Definitive Solutions:
Corporate Finance: Davy.
Legal: Flynn O’Driscoll led by David Ryan, supported by Elaine Cully and Alastair Baird.

Renatus Comment: For those in attendance at The Real Deal this past Wednesday, you will have heard Kevin O’Loughlin reference this deal. As part of the panel discussion on ‘Growth by Acquisition’, the audience was treated to a fascinating insight into Nostra’s acquisition strategy as it continues to grow rapidly.

Nostra has three main rationale for acquisitions – revenue, talented people and opportunities for existing staff to grow long-term. Interestingly, Kevin also noted the difficulty in recruiting expert technical people organically and why over-selling and poor retention rates are two major red flags when he looks at potential target bolt-ons. This is the company’s 6th deal since 2016, acquiring Passax Business Systems just last month. Nostra’s rapid pace of dealmaking seems set to continue with O’Loughlin also stating that it has two more acquisition deals in advanced stages. Nostra has a fantastic growth story and it was great to hear it told in Goffs this week.

Source: Business Plus

Deal Details: Viatel has acquired the Irish arm of Sungard AS for an undisclosed amount.

Viatel is a Dublin-based digital services provider that delivers managed security, networking, cloud, and communications services. The business has been in operation for 26 years with additional locations in Cork, Limerick, and Louth. Viatel is 100% owned by Digiweb, which is ultimately owned by Colm Piercy of Chirisa Investments alongside Quay Ventures. The business has forecasted annual revenues of €90m for 2022 following the acquistion .

Sungard AS is a US-based provider of IT production and recovery services with offices in 12 countries internationally. The Dublin data centre provides cloud hosting, disaster recovery, managed IT services, and consulting services. The business does not report turnover or EBITDA information.

Advisers:
Viatel:
Legal: Venture Legal Services.
Banking: AIB Capital Markets.

Sungard AS:
None mentioned.

Renatus Comment: Viatel has been a notably acquisitive player having completed its eighth acquisition in two years. Ireland is the European hub of over 1,000 leading multinational companies and the need to have a complete set of digital service solutions is becoming increasingly important, as hybrid working models continue to increase. This acquisition will provide Viatel with new AWS capabilities in addition to its existing expertise in Microsoft Azure solutions and will give the business access to a substantial multinational customer base, as well as additional capacity with Sungard AS’ data centre facilities in Park West and Profile Park.

Source: Viatel Press Release

Deal Details: The Ellerker Group has been acquired by Crown Workspace.​ Deal consideration has not been disclosed.

The Ellerker Group is a commercial relocation and move management business based in Dublin. It was owned by Ivan and Lindsay Ellerker. It does not report turnover or EBITDA information.

Crown Workspace is a workspace management company based in the UK. In FY Dec 21 it reported turnover of c. £25.1m which converted to EBITDA of c. £0.7m. It is part of the Crown Worldwide Group, a global logistics, transportation and storage business which is headquartered in Hong Kong.

Advisers: None mentioned.

Renatus Comment: Prior to the pandemic, the relocation services industry was expected to grow at a significant rate due to increasing globalisation and the need for businesses to expand their operations. However, the pandemic had a significant impact and the industry still faces challenges, evidenced by the vacancy rates of commercial property in Ireland hitting a record 14% in February this year. In late 2022, Big Tech firms such as Google, Meta and Salesforce were all seeking to abandon leased office space in Dublin.

Despite this slowdown, we are still seeing multiple multinational companies take up significant office space in the city. LinkedIn moved into Wilton Terrace in recent months, while Aon and PDD Holdings have also announced plans to take up more office space in the city.

Source: Business Plus

Deal Details: VentureWave Capital has led a c. $40m investment in Funderbeam. Co-investors in the round include Mistletoe, Draper Associates and Funderbeam founder and CEO Kaidi Ruusalepp.

Venturewave is a Dublin-based VC investor focused on impact investing. VentureWave has 2 European and 1 US-based funds under management dedicated to impact investing with a global network of LPs including family offices, high-net-worth entrepreneurs, and institutional investors. VentureWave was founded by Alan Foy, Brian Martin and Kieran McLoughlin in 2020.

Funderbeam is an angel investing and trading platform founded in Estonia. Funderbeam holds investment firm licences in the UK, Estonia (covering EEA), and Singapore.

Advisers:
VentureWave:
Deal Advisory:: Grant Thornton.

Funderbeam:
None Mentioned.

Renatus Comment: The acquisition will be used to expand VentureWave’s global presence as it will take an active leadership role in scaling Funderbeam’s technology across venture assets. According to KPMG’s latest Venture Pulse report, venture capital investment into Irish firms decreased 57% in Q1’23 compared to the same period last year. There have been a lot of macro factors including increasing interest rates, banking closures, and high inflation rates that have undoubtedly impacted the rate of VC investments. However, as technology continues to advance and disrupt traditional industries, VC firms will play an important role in identifying and supporting transformational start-ups.

Source: FunderBeam Press Release

Deal Details: Lumenia Consulting has been acquired by three senior management team members in a management buyout. Deal consideration has not been disclosed.

Lumenia is an independent ERP consulting organisation, specialising in business transformation through the implementation of Enterprise Resource Planning and related enterprise software applications. The business was owned by Sean Jackson prior to the transaction. It is based in Galway. The business was originally spun out from BSM Group in 2013. It does not report turnover or EBITDA information.

The MBO team consists of Ursula Browne, John Donagher and Ian O’Toole. Each will serve as managing partner following the acquisition.

Advisers:

Lumenia:
Corporate Finance: RBK led by Chris Ball.
Legal: Ronan Daly Jermyn.

MBO Team:
Corporate Finance: Focus Capital Partners.
Legal: Regan Wall.

Renatus Comment: As highlighted by Indeed, some of the critical factors for a successful ERP implementation include commitment from management, a defined scope for what you want your ERP to achieve, employee involvement and executive support. It also highlights the importance of selecting a complementary brand partner for implementation, which is where players such as Lumenia come in. Having a partner on board with experience at the design and configuration stage can be the difference between a (somewhat) seamless ERP integration and an expensive, disruptive project which can draw management’s focus away from the critical day-to-day running of the business.

Source: Lumenia Press Release

Dexacom announces €300m Galway investment

Dexacom has announced plans to construct an advanced medical device manufacturing facility in Athenry, Co. Galway, creating up to 1,000 jobs. The investment seeks to increase the business’ capacity to scale quickly and meet market demand, with revenues having grown from $600m in 2013 to $3.5bn this year.

Source: Business Post
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In its financial year to August 2022, the business generated a turnover of c. £94.5m, an increase of c. 43% year-on-year. This converted to an EBITDA of c. £9.7m, an increase of c. 34% year-on-year.

The business finished the year with a cash balance of c. £1.3m. Significant post-EBITDA cash movements include payments to acquire tangible assets of c. £3.9m and working capital investment of c. £7.9m.

The business employed an average of 204 people in FY22 at a total cost of c. £8.5m.

Findlater Hotels Limited. is the operator of the Castle Hotel on Gardiner Row in Dublin. The hotel is 4-star and has 121 rooms. It is owned by Fionn MacCumhaill.

In its financial year to March 2022, the business generated a turnover of c. €11.7m, an increase of 276.5% year-on-year. This converted to c. €0.8m EBITDA, up from a  loss of c. €1.8m during the heavily Covid-impacted period in FY March 21. The increase in EBITDA was driven by an improvement in trading conditions following Covid, an increase in gross margin of 0.9% and the realisation of operating leverage in the business.

The business finished the year with a cash balance of c. €4.0m, a c. €2.4m increase on FY21. Significant post-EBITDA cash movements included c. €5.1m in cash released from working capital and the c. €4.5m re-payment of a short term loan.

The business employed an average of 169 people during the period at a total cost of c. €5.2m.