Renatus Weekly M&A & Company Performance Private Equity Newsletter 25/06/2023

Deal Details: Boojum, a Renatus Portfolio company, has been acquired by the Azzurri Group. Deal consideration was not disclosed.

Boojum is a Mexican-themed fast-casual restaurant chain that operates from 14 sites in the Republic of Ireland and Northern Ireland. Boojum first opened in Belfast in 2007. In 2015, Renatus partnered with brothers David and Andrew Maxwell to acquire the business when there were 5 locations in total. Today, Boojum employs over 300 staff across the island of Ireland. In FY Apr 22, the business reported turnover of c. €27.1m.

The Azzurri Group is one of the UK’s largest and most successful casual dining businesses. Azzurri operate two leading national Italian brands, Zizzi and ASK Italian, and the UK’s leading quick-service Italian, Coco di Mama. The group employs nearly 5,500 people and serves over 13 million meals annually across  200 restaurants and shops.

Advisers:
Renatus & Boojum:
Corporate Finance: PwC Corporate Finance led by Mark McEnroe, Laura Kilbride and David Booth
Legal: ​​​​​Byrne Wallace led by Eamonn Carey, Emmet Connolly and Michelle McVeigh
Mills Selig led by Darren Marley and Chris Guy
Tughans led by John McGuckian and Cassie McCormick
Vendor Due Diligence: BDO led by Rory O’Keeffe, Andrew Frazer and Angela Fleming
Tax: KPMG Dublin led by Caoimhe McLoughlin and Claire Waters
KPMG Belfast led by Paddy Doherty and Harriet Porter
Commercial Due Diligence: PwC led by Eleanor Scott

Azzurri Group:
None Mentioned.

Renatus Comment: We are delighted to have worked closely with Boojum over the past 8 years and we exit with a heavy heart.  Boojum is a trailblazing brand, and this transaction marks another exciting milestone in the company’s growth trajectory.

We would like to thank David Maxwell and his team for the outstanding work, drive and creativity in developing the business and culture of Boojum and wish Azzurri and Boojum every success in the future. The defining moment for us was in the eye of the Covid storm in March 2020 when other food brands small, medium and large were shutting their doors, David and his brilliant team found a way to stay open. No MBA teaches that, and no investment algorithm spots that in a management team. This proves that our game of investing is all about backing and supporting management teams.

Both ourselves, David and team are overwhelmed with the good wishes we received in the past week and it proves we are playing in such a great business community  with great people and so privileged to be doing so.

Source: Boojum Press Release

Deal Details: MyComplianceOffice (MCO) is to acquire Fairwords for an undisclosed amount.

MCO is a Dublin-based developer of compliance software solutions to manage governance, risk, and compliance responsibilities. The business is led by CEO, Brian Fahey. In FY Dec 21, the business reported turnover of c. €20.4m.

Fairwords is a US-based AI-powered training software that provides compliance leaders and teams with proactive training, analytics, and archiving to mitigate communications risks and prevent compliance crises and lawsuits. In 2022, the business received c. $5.2m Series A funding led by Fintop Capital.

Advisers: None Mentioned.

Renatus Comment: MCO received €10m in debt financing from Accel-KKR in October of 2021, with a second round of financing raised in 2022. It has been active in the M&A space since, acquiring an employee monitoring service company in 2022 (Schwab Compliance Technologies), and a compliance governance and oversight solution provider in 2021 (Governor Software).

The theme of compliance AI M&A deals is being seen on a global level. This year, CUBE, a UK-based provider of AI regulatory software acquired The Hub, a RegTech firm in January, and RQM+, a US-based MedTech service provider announced the acquisition of Giotto Compliance in February. We live in a time where we are experiencing the rapid digitization of the world and it is becoming increasingly easier to ensure real-time compliance with automation tools on the horizon. AI’s predictive features can help detect anomalies and automate compliance documentation to help mitigate  issues – an area of key focus for MCO. Brian Fahey, CEO of MCO stated “With this acquisition, we will further augment our solution for exceptional integrated surveillance capability across all transactions, employees, and third-party entities”.

Source: BusinessWire

Deal Details: Packaging Holdings is to merge with Grafham Holdings for an undisclosed amount.

Packaging Holdings is a packaging business that was incorporated in June 2022. It has since raised €40m in a mixture of debt and equity. Its investors and shareholders include IFP Investments Limited chaired by Barry O’Brien, Martello Group (family office) headed by Tom Reynolds, Staunch Limited headed by Declan Cassidy, and the former owners of Ace Corrugated and Craftpak Packaging.
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Grafham Holdings was founded in 2001 and is owned by Kevin Beamon and Bill Habergham. The group is based in the UK and the structure consists of Delta Pack (Bag Manufacturer), Hovat (Bag & Self-Adhesive Label Manufacturing), Advance (Label Supplier), PH Labels (Label & Packaging Supplier), and Retail Packaging Solutions (Disposable Food Packaging Supplier). Clients include Tesco, Aldi, Lidl, Marks and Spencer, Waitrose, Sainsbury, and ASDA. In FY Dec 21, the business reported turnover of c. £23.3m which converted to an EBITDA of c. £2.6m.

Advisers:
Packaging Holdings:
Legal: OCWM Law led by Edel Conway and Michael Walsh
Financial Due Diligence: RBK led by Aidan Heavey and John Donohoe

Grafham Holdings:
None Mentioned.​​​​

Renatus Comment: This deal follows two months after Packaging Holdings announced the acquisition of both Ace Corrugated and Craftpak Packaging. It is reported that the group now spans ten packaging companies in Ireland with a combined turnover of c. €50m.

Packaging Holdings has been an active consolidator focused on sustainability. Plastic straws are becoming a thing of the past as companies are having to focus on the environmental impact of disposable plastic products. The revision of the EU Packaging legislation in 2022 is focused on making all packaging recyclable by 2030, as packaging is currently one of the main users of virgin materials (c. 40% of plastics and c. 50% of paper used in the EU are destined for packaging according to the European Commission). Supported by increased regulation, we anticipate seeing more Irish deals in the sustainable packaging space.

Source: Irish Examiner

Deal Details: Kingpsan has acquired waterproofing distribution specialist LRM. Deal consideration was not disclosed.

Kingspan, headquartered in Kingscourt, Co. Cavan, is a global leader in high-performance insulation and building materials solutions. Kingspan Group reported FY Dec 22 turnover of c. €8.3bn and EBITDA of c. €1bn. The business is led by CEO Gene Murtagh.

LRM is a Paris-based waterproofing distribution specialist. Products include fixings and accessories for roofs, waterproofing and facade products, lifelines, crinoline ladders and security railings. The business does not report turnover or EBITDA information.

Deal Details: Azets has received investment from PAI Partners. Deal consideration was not disclosed. PAI Partners will hold an equal and co-controlling stake in Azets alongside current owners Hg Capital.

Azets is a Norway-based professional services group that offers audit, accounting, outsourcing, compliance, and advisory services. It was formed by Hg Capital as part of a 2016 merger. In March this year, Azets acquired Irish firm Baker Tilly which was re-branded as Azets Ireland. The group is reported to have revenue of c. £700m.

PAI Partners is a Paris-based private equity firm established in 1872. It currently has over €26bn AUM and operates from 8 global offices.

Advisers:
Azets:
Legal: Travers Smith LLP led by Adam Orr, Jessica Kolhorn, Eilidh Morrison, Ollie Creamer and Joseph Gitata.
Tax: Travers Smith LLP led by Russell Warren and Hugh Brooks.
Corpoate Finance: Liberty Corporate Finance.

PAI Partners:
None Mentioned.

Renatus Comment: Azets was formed to assist SMEs with the growing digitalisation of financial compliance processes. The roll-up plays in professional services have gained momentum as platform companies like Azets use bolt-ons to acquire and expand into new verticals and geographies. A key risk relates to the fact that much of the value of these firms is tied to its key senior employees and their client relationships. For this reason deferred considerations and strong employee incentive schemes are often key to the successful implementation of this strategy.

It is notable to see two of Europe’s largest private equity firms co-sponsoring a deal and it will be interesting to see what strategic approach the joint managment bring. Azets has said that it will use its newly bolstered balance sheet to continue to pursue acquisition-led growth.

Source: Azets Press Release

Deal Details: E.A. Martin has been acquired by Troy UK. Deal consideration was not disclosed.

E.A. Martin & Son Ltd. is a hardware wholesaler to builders, agriculture, plumbing, electrical merchants and hardware traders. It is based in Kilrea, Co. Derry. It was owned by James, Pauline & Emily Martin, Pyper Lyle, and Catherine & Rachael Coull. The business does not report turnover or EBITDA information.

Troy UK is the largest independent distributor of industrial and engineering supplies in the UK. It is owned by Paul Kilbride, Alexandra Kilbride, David Jackson, Richard Pymm, Wayne Hobbs, Jason Chance, Oliver Kilbride, Alexander Kilbride, Daniel Cornish, Edwin Thomas, Christopher Taylor and Stefan Sumner. Just last week it announced a £15.5m investment from BGF. In FY Dec 21, it reported turnover of c. €255.8m which converted to EBITDA of c. €4.2m.

Advisers: None Mentioned.

Renatus Comment: E.A. Martin is the second Derry firm acquired by Troy UK in the past two years following its acquisition of Maghera-based MOL Tools and Abrasives Ltd in 2021. The deal brings the number of businesses it has invested in throughout the UK to 17 over the last 5 years. These deals have spanned a variety of sectors including industrial consumables and PPE, Precision Cutting Tools, VMI and supply chain management.

Construction activity in the North has remained low in recent months with the Royal Institution of Chartered Surveyors (RICS) Construction Monitor falling into negative territory for the 4th consecutive quarter in Q1 2023. The lack of a functioning government in the North has also contributed to the general lack of optimism around the space as public sector work has slowed. Hopefully, this deal will represent a vote of confidence in the trade industry going forward.

Source: Irish News

Deal Details: Vita Actives has been acquired by Dairygold Health and Nutrition. Deal consideration was not disclosed.

Vita Actives is a Dublin-based nutrition and ingredients business established in 2006. It was fully owned by Deepak Sharma. It does not report turnover or EBITDA information.

Dairygold is a Cork-based co-operative that was formed in 1990 following the merger of the Mitchelstown and Ballyclough co-ops. It formed its Health and Nutrition business in 2020. In FY Dec 22, the group reported turnover of c. €1.7bn which converted to EBITDA of c. €68.5m.

Advisers:
Vita Actives:
Corporate Finance: Grant Thornton led by Michael Neary and Stuart Mellon
Tax: Grant Thornton led by Peter Vale
Legal: Dillon Eustace led by Mark Thorne, Adrian Benson and Emer Travers

Dairygold:
FDD: Deloitte led by Marc Rogers and Claire Grimes
Legal: Arthur Cox led by Colin Kavanagh, Graham Murtagh, Laura Haddigan and Omotola IIori

Renatus Comment: Following the launch of its Health and Nutrition division several years ago, ex-CEO Jim Woulfe said that the business had c. €100m available to pursue acquisitions. The rationale for the unit was to separate and focus on higher-margin products, downstream from milk in the value chain such as protein powders, baby formula and other ingredients products. This has long been a strategy of other Irish dairy businesses such as Kerry Group and Glanbia who have enjoyed global success. Dairygold also stated that the Asian market presents a significant growth opportunity for this division, so it is likely that it will target bolt-ons here in the coming years.

Source: The Examiner

Deal Details: Cora Systems has received a “significant growth equity investment”  from Scottish Equity Partners.

Cora Systems is a Leitrim-based enterprise project and portfolio management solution provider. The business manages a reported $100bn worth of projects on its platform daily. The business was founded by Philip Martin in 1999 and is headquartered in Carrick-On-Shannon, with offices in USA and UK. In a 2022 article by the Business Post, the business had “passed €60 million of sales in its current financial year”.

Scottish Equity Partners (SEP) is a growth equity firm, operating across the UK and Europe, with a technology focus.

Advisers:
Cora Systems:
Financial: IA Global Capital
Legal: Eversheds Sutherland led by Corporate Partner Enda Newton and included Gerard Ryan (Partner, Corporate), Jonathan Ennis (Senior Associate, Corporate), Vanessa Lawlor (Associate, Corporate), Aoife Ryan (Solicitor, Corporate), Robert Dever (Partner, Tax), Marie McGinley (Partner, IP/IT), Ellie Cater (Senior Associate, IP/IT), and Julie Galbraith (Partner, Employment)

Scottish Equity Partners:
None Mentioned.
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​​​​Renatus Comment: Cora serves several clients across the manufacturing, aerospace & defence, healthcare, and life sciences sectors, including Abbvie, Honeywell, Irish Rail, and the UK’s NHS. The business has experienced impressive growth in recent years with expansion into the US. John Fitzgerald (CFO) stated that during the “hardcore part of the pandemic”, Cora invested more than €10m in its team. The investment appears to be paying off with Cora reporting growth of c. 330% in the 12 months to June 2022.

Source: Cora Systems Press Release

Deal Details: Bevcraft Group has acquired Tripod Canning for an undisclosed amount.

Bevcraft Group is a specialist process and packaging business primarily focused on craft & artisan beverage producers. The business was founded in Mullingar by Darren Fenton and Ciarán Gorman in 2016. Bevcraft Group does not report turnover or EBITDA information.

Tripod Canning is a US-based mobile canning business. The business offers a range of services including can filling, materials procurement, cans, labels, date coding, seam checking, dissolved oxygen testing, and logistics management. The business does not report turnover or EBTIDA information.

Advisers:
Bevcraft Group:
Legal: The McHattie Law Firm led by Michael Gattoni and Chris McHattie
Corporate Finance: RBK led by Chris Ball

Tripod Canning:
None Mentioned

Renatus Comment: This is the 3rd M&A deal completed by the Bevcraft Group in the last 18 months. During January, Bevcraft Group merged with Heidrun Tapperi to further increase its production capacity. Prior to that, the business acquired Them That Can in 2022 to further its UK presence. This acquisition will be the point of entry for Bevcraft in the US market with Bevcraft already providing mobile canning across Europe from bases in Ireland, Norway, the UK and the Netherlands. While challenges remain and growth may have slowed from covid pace, craft beer brewing is still growing, specifically in the US. Overall U.S. beer volume sales were down 3% in 2022, while craft brewer volume sales remained on par with 2021 (8% sales growth to 24.8m barrels in 2021), according to the US Brewers Association.

Source: Bevcraft Group Press Release

Deal Details: Tricel has acquired Edincare Pumps. Deal consideration was not disclosed.

Tricel is a Kerry-based provider of engineering solutions for the water, environmental, construction and distribution industries. It was founded in 1973 by Anne and Con Stack and is still owned by members of the Stack family including Robert, Richard, Michael, Grainne and Cornelius. The company does not report turnover or EBITDA information.

Edincare Pumps is a UK-based provider of pumps and pumping systems as well maintenance, repair, and installation services. It was owned by Richard Collis, Andrew Davies and Michelle Quastel. It does not report turnover or EBITDA information.

Advisers:
AREX Markets Group:
Legal: LK Shields led by Emmet Scully, Lester Sosa-Villatoro and Jonathan Braden

Bankable:
None Mentioned

Renatus Comment: With over 270k SMEs in Ireland, there is a market for Fintechs and SMEs to form mutually beneficial partnerships. In recent years, there has been a big rise in alternative financing solutions for SMEs with specialist companies such as AREX stepping into the gap left by traditional banks choosing to focus on their core offerings. In 2021, the Irish Times reported that Irish companies are increasingly turning to invoice financing to fund growth, “nearly €1bn was advanced by mid-year from non-bank lenders who extend credit based on customer orders”. Used sensibly, these specialized offerings can be beneficial to a business’s growth.

Source: LK Shields

Gallagher Brothers (Fish Merchants) Limited is a Donegal-based seafood provider. The business was established by brothers Jack and Phil Gallagher in 1919 and it is currently owned by the Gallagher family.

In its financial year to July 2022, the business generated turnover of c. €22.5m, an increase of 35.1% year-on-year. This converted to an EBITDA of c. €2.3m, an increase of 16.8% year-on-year. The realisation of operating leverage was a key driver in EBITDA growth year-on-year.

Significant post-EBITDA cash movements include cash released from working capital movement of c. €2.2m and the repayment of bank borrowings of c. €3.2m. The business finished the year with a cash balance of c. €5.9m, an increase of 6.5% year-on-year.