Benchmark International is delighted to announce the majority sale of Irish fire-protection systems company, Writech, to Waterland.
Established in 1981 by Thomas and Mary Wright, Writech provides fire protection system design, installation, manufacture, commissioning, and services across a range of sectors including logistics, data centres, life sciences, office, retail, and food & beverage.
Sons Ted and Alan Wright took over the business in 2008, now generating more than €20m in revenue. Writech will use Waterland’s investment to expedite expansion plans in Europe and the UK, as well as increase output at its Mullingar centre, creating over 30 jobs.
Waterland is a Dutch-based private equity house, headed by Laura Dillon in Ireland. The investment group has €8bn in assets under management across Belgium, the Netherlands, the UK, Germany, France, Denmark, Poland, and Switzerland.
Benchmark International is delighted to announce the majority sale of Irish fire-protection systems company, Writech, to Waterland.
While you may be hearing that the M&A market is currently active, numbers speak volumes. A recent article from U.S. News cited that private equity (PE) has inked more than 2,300 deals for the first five months of 2021. Year-over-year, this is just over a 21% increase in deal volume. In fact, according to Pitchbook data, in the first half of 2021, PE firms closed on 3,708 deals worth a combined $456.6 billion. That’s almost two-thirds of the $711.6 billion deal value recorded in the entire year of 2020, and the two years prior. It is estimated that there is roughly $3 trillion of dry powder—also known as available funds—on hand for investment, with even a large amount of assets under management.
Historically low-interest rates and record levels of fundraising have left private equity with dry power that they must put to use. The combination of these factors has created competitive bid scenarios for many sellers. It appears that many private equity firms believe that this trend will continue for the coming months. According to S&P Global Market Intelligence, roughly 7% of private equity firms believe that the investment landscape will deteriorate in the coming months.
You may be asking yourself, “What is private equity?” Private equity firms obtain capital to invest in private companies. They have a set period of time to make the investments with the goal of optimizing return for their investors. Their investors tend to be institutional investors such as insurance companies, pension funds, endowments, etc.
The firms typically invest in mature companies with predictable, steady cash flow and a need for operational changes or growth capital. Private equity firms will utilize their capital, connections, and expertise to help improve the managerial, financial, and operational aspects of the business. Their goal is to increase the profitability of the company as this will help drive the value of the company upon exit. The firms make investments with a ‘buy and build’ mentality.
Private equity firms realize their returns when they sell the investment. The firms tend to have a goal of roughly 20-30% return on their equity. Private equity firms will use leverage to help maximize their return. They also charge a management fee, typically a percentage of total assets under management, also known as AUM.READ MORE >>
Financial buyers are the companies we work with that are typically labeled as private equity (PE), a family office, a hedge fund, etc. In the traditional sense, a financial buyer is primarily concerned with the cash flow generated by a company or asset that they acquire. They think about investment opportunities (clients to us) through the rate of return they can obtain from years of bottom-line enhancement and an eventual resale of the asset at a premium, or much higher valuation, than when they bought it. Like trading stocks, but with more hands-on involvement, they wish to “buy low and sell high.”
There’s a strong chance, however, that many of the buyers you’re likely to see now as a seller in the lower-middle market fit the mold of what I call the “new-look” financial buyer. Your traditional private equity funds, for example, now tout an investment strategy with no timeline for an exit on their portfolio companies. This approach emphasizes the “culture” their respective firms bring to the table for the seller, and in a highly competitive buyer market vying for deal flow, this might make all the difference.
The new-look financial buyer focuses on employee retention, low-cost growth initiatives, management equity rollover, and various other incentives to promote an environment free from the traditional return-over-everything stigma. Go to the “About” or “Approach” section of many of these firms, and I am willing to bet you’ll see words like “collaborate,” “legacy,” “partner”—perhaps even with a chart comparing their firm side-by-side with the traditional PE model to demonstrate explicitly how they’re different. This is especially prevalent in the lower-middle market where our clients are often owner-operated, founder-led businesses cultivated across generations and spanning multiple decades.
A financial buyer must now separate itself from the competition, which is good news for our clients. As mentioned above, time horizons for financial buyers have increased in length as many PE firms now reorient as long-term investors. Many will make it a point to let our clients know they don’t intend to dramatically cut costs (including through personnel changes) as this would directly conflict with the evolving model.
At the same time, financial buyers (i.e., private equity groups and other institutional investors) can be lucrative partners for our clients through a variety of value-adding benefits that they bring to the partnership. These buyers, for example, often bring economies of scale through established and profitable portfolio (“platform”) companies and are therefore able to jumpstart revenue via access to untapped markets or unrealized customers bases. Furthermore, these platforms absorb back-office duties that might have previously slowed down the productivity of key employees, and even owners. Also, while exit strategies have become more relaxed from a timing perspective, financial buyers will not hold the asset indefinitely, and for sellers who maintain equity in the merged company post-acquisition, this means the opportunity to take a “second bite of the apple” upon exit.
When dealing with a financial buyer, be sure to ask some important questions:
- Are you a committed capital fund? It’s important that they have financing available instead of “shopping” the deal after locking a client into a letter of intent.
- Have you closed a deal before? Have you closed a deal in this space before? Note: a website with no portfolio page of active or inactive past deals can be a red flag.
- What does your capital stack typically look like (i.e., how much leverage will they use or how much debt will be placed on the balance sheet on the company)?
- How long has your fund been around?
- Do you have operating partners in the space?
- Why are you interested in our client?
- How do you plan to integrate our client into your firm or existing platform company?
- Culture is important to our clients. Can you speak to culture?
- How do you typically structure your deals?
- What is your timeline for a completed transaction?
- Am I able to speak with owners of previous companies for deals you’ve completed?
- My employees mean everything to me. What do you plan to do with them?
This is by no means an exhaustive list. Seller questions to the buyer will, of course, become more specific as the deal progresses. However, the basic questions above are a good starting point and represent the beginning of a potentially meaningful and lucrative journey for sellers considering PE for the next phase of their company’s growth.READ MORE >>
Benchmark International is pleased to announce the transaction between Bath-based managed service IT provider, Westgate IT, and Sussex-based Acora.
Established in 1997, Westgate IT is a provider of IT support, subscription and cloud-based services, and bespoke security solutions.
Acora is an award-winning managed IT services company based in London, Sussex and the Midlands. Services range from the design and build of complex solutions to the day-to-day management of services. Acora is backed by Palatine Private Equity, an independent private equity firm headquartered in Manchester.
This highly strategic acquisition is of significant importance to Acora, allowing it to further expand into the South West with greater access to local talent, an additional service centre and more than 100 clients.READ MORE >>
Benchmark International is pleased to announce the transaction between Essex-based law firm, Fisher Jones Greenwood (FJG), and private equity firm, Blixt Group.
FJG is a multi-award-winning firm of solicitors covering a broad spectrum of fields such as residential conveyancing, family law, probate, and immigration and asylum, as well as some niche specialisms. The company operates from four offices across Essex and one in London, employs 158 staff and has a £7.3m turnover.
Blixt is a private investment firm partnering with lower mid-market companies across Europe. Headquartered in London, the company targets businesses valued between €20m and €200m and has access to over €250m of committed institutional investor funding. Blixt is aiming to invest nationally in the legal sector with the goal of creating a national firm with a turnover of at least £100m in four to five years, and FJG is a springboard for these acquisitions.READ MORE >>
Data released in a recent report by Pitchbook shows the unprecedented performance of U.S. Private Equity (PE) during the first half of 2021, continuing its intense pace for the third quarter in a row. PE firms closed on 3,708 deals worth a combined $456.6 billion. That’s almost two-thirds of the $711.6 billion deal value recorded in the entire year of 2020, and the two years prior.READ MORE >>
Benchmark International is pleased to announce that County Antrim ventilation systems installer, RGM Vent, has secured £3.35 million investment from private equity firm, Foresight.
The funding is a co-investment between the Foresight Scottish Growth Fund and the Northern Ireland Opportunities Fund II, also managed by Foresight.
RGM Vent was established in 2010 and offers bespoke ductwork design and installation services to a broad customer base across the UK and Ireland, with the company completing work of prominent infrastructure developments including WuXi Pharmaceutical (Dundalk), University of Ulster (Belfast), Hampton by Hilton (Edinburgh) and Longwater Office Development (Reading). The company has experienced a significant period of growth over the last five years and now employs 75 staff.
Part of the company’s growth has seen it purchase Advanced Ventilation Systems, which focuses on the smoke, heat and exhaust ventilation market, and NSK Sheet Metal, which specialises in fabrication and manufacturing of ductwork.
Foresight is an award-winning listed infrastructure and private equity investment manager which has been managing investment funds on behalf of institutions and retail clients for more than 35 years. Foresight’s private equity team, comprising over 30 investment professionals, manages c£700 million in a portfolio of more than 100 companies.
Leveraging Foresight’s support, RGM Vent is now well primed to implement its growth strategy across the UK and Ireland.READ MORE >>
Benchmark International is pleased to announce the transaction between Cambridgeshire-based Aprenda and Leicestershire-based BRUSH.
Aprenda is a high voltage electrical apparatus engineer, specialising in the installation and refurbishment of substations for blue-chip clients throughout the UK. Projects include turnkey design & build projects, preventative maintenance, equipment upgrades and new substation installations.
Founded in 1889, BRUSH is the leading independent provider of equipment, services and solutions for electrical power generation and distribution and is the world's largest independent manufacturer of generators above 20MVA. BRUSH's products are used across a wide range of end markets, including utilities, industrial, maritime, rail, data centres and renewable applications.
The acquisition of Aprenda will provide BRUSH with a leading design engineering platform focused on UK power distribution network projects.READ MORE >>
Benchmark International is pleased to announce the simultaneous acquisitions of PBSL Group and Securi-Flex by an MBI candidate, backed by private equity firm, Chiltern Capital.READ MORE >>
Benchmark International is pleased to announce the transaction between Winchester-based Vita Play and Bedfordshire-based Beds Construction.
Established in 2009, Vita Play provides turnkey solutions for children’s outdoor play spaces and environments, including fencing and street furniture, as well as specialist safety surfacing. Undertaking all work in-house, the company provides a complete service from design through to installation and maintenance. Operating from purpose-built facilities, the company primarily serve local authorities, schools, and private domestic clients across Hampshire and the surrounding counties.
Private equity backed Beds Construction is an established business in the construction sector. It seeks to pursue synergistic bolt-on opportunities with well-established companies that have a turnover between £1m and £15m, a strong balance sheet and a long operating history.READ MORE >>
Benchmark International is pleased to announce the transaction between Stoke-on-Trent based Hymor Timber (Hymor) and National Timber Group (NTG).
Established in 1990, Hymor is an independent timber merchant supplying ethically sourced hardwood and softwood to a range of trade and commercial customers, including joiners and manufacturers.
Hymor employs 28 people and in 2020 achieved revenues of £4.5m. Hymor’s acquisition was initiated by the owners’ succession planning.
National Timber Group is the largest independent added-value timber distribution and processing group in the UK, serving a diverse customer base including joiners, housebuilders, and contractors. Created through the acquisitions of market-leading brands Thornbridge, North Yorkshire Timber, Rembrand and Arnold Laver, the group now has a combined turnover of over £250 million, over 1,300 employees, and 64 processing and distribution sites.
National Timber Group is a portfolio company of Cairngorm Capital Partners, a specialist private investment firm providing equity capital and management expertise to leading UK companies. It invests in strongly performing, private mid-market growth companies in manufacturing, distribution and services industries.
A highly complementary and strategically beneficial transaction, it enables National Timber Group to expand into the Midlands and North West. Hymor’s product offering also complements those at NTG’s specialist hardwood depot in Hull that serves Yorkshire and the Humber.READ MORE >>
How Private Equity Works
Private equity firms raise financing from institutions and individuals and then invest those funds into the buying and selling of businesses. Once a pre-specified amount is raised, the fund closes to new investors and is liquidated. All of the fund’s businesses are sold within a set timeframe that is typically less than ten years. The more successfully a PE firm’s funds perform, the better its ability to raise money in the future.
PE firms do accept some limitations on their use of investments under fund management contracts, such as the size of any single business investment. Once the money has been committed, investors have nearly zero control over its management, unlike a public company’s board of directors.
The leaders of the companies within a private equity portfolio are not members of the PE firm’s management. Private equity firms control its portfolio companies through representation on the boards of those companies. It is common for a PE firm to ask the CEO and other business leaders in their portfolios to invest personally. This offers a way to ensure their level of commitment and motivation. In return, the operating managers can get significant rewards that are linked to profits when the company is sold.
With large buyouts, PE funds usually charge investors a fee of around 1.5 to 2 percent of assets under management, plus 20 percent of all profits (subject to achieving a minimum rate of return). Fund mostly profit through capital gains on the sale of portfolio companies.
How Private Equity Improves ValueREAD MORE >>
Benchmark International is pleased to announce our attendance at Kayo’s Healthcare Investment Forum on December 2, 2020.
The conference will explore why private equity finance has become such an attractive option for healthcare companies, with a focus on healthcare service, practice management, and healthcare tech.
- C-Suite executives at public and private healthcare service and healthcare technology companies
- Venture capital, private equity, healthcare and private equity industry advisors, and lenders
Link to Forum Registration: https://kayoconferenceseries.com/summits/
Link to Agenda: https://kayoconferenceseries.com/healthcare/healthcare-investment-summit-agenda/
Kayo’s Healthcare Investment Forum
The conference will cover new technologies, new entrants, a shift to outpatient and home-based services, and the move towards value-based care continue to create new financial pressures for healthcare organizations. As healthcare leaders reimagine their services and transform operations, private equity is stepping up to help.
Kayo believes women should have a community that supports, elevates, and champions them. That’s why they create industry events where professional women can connect with leaders, advance themselves, and champion other women. They want women to know they’re stronger when they Trailblaze Together.
READ MORE >>
As the world still faces the COVID-19 pandemic, businesses in the financial services sectors are preparing themselves for life after coronavirus. This includes the management of credit risk for borrowers, and turning to digital strategies to drive revenue growth.
Insurance and Innovation
The COVID-19 pandemic is forcing the entire insurance sector to implement and leverage digital platforms that enhance customer experiences as a key part of their business strategies in a transformed world in which people are working remotely and driving their vehicles less often. The pandemic has led insurance companies to implement premium relief efforts, offer payment deferral plans, and expand coverage, but these companies are also turning to more digital strategies, emphasizing online customer experiences at a time when more and more transactions occur online versus in person. Consumers are demanding new products such as cyber insurance, more modern life insurance options, and usage-based car insurance. Middle-market insurance companies have always been a bit technologically behind the big players, but they now must adopt new innovations in order to merely keep up with convenience, simplicity, mobility, and modern interfaces that customers have come to expect.
Banking and Lending
Financial institutions are in a position where they need to understand borrowers’ needs and current financial states more than ever. They must also find new ways to measure performance through the rest of 2020. They have already provided assistance to many small and mid-size businesses during the crisis, some of which will be forgiven. Loan modifications have been provided to help businesses survive, and there is likely to be some loan losses. As the economy begins to recover, banks will be able to get a better understanding of borrowers’ financial states, knowing that it will take some time for businesses to bounce back. Deciding whether to lend more credit will be a difficult decision for financial institutions, especially for harder hit sectors such as hospitality and retail. Understanding the recovery of these industries as a whole will be critical through the use of data and payment activity monitoring.
Family offices are private wealth management firms that serve high-net-worth individuals and their families by offering a total outsourced solution to managing finances and investments. There are nearly 2000 of these types of firms around the world, with more than half in the U.S.
These firms have typically relied on physical offices to conduct business. Now in the wake of COVID-19, a shift to virtual family offices has become a necessity during a time where remote work has become commonplace. This has been a challenge for many family offices because most simply do not have the appropriate technology and infrastructure to result in a seamless transition to a virtual office. These businesses will be forced to evolve technologically into the rest of 2020 and beyond. As outdated technology is replaced with better performing innovations, family offices will become more mobile and agile, as well as better equipped with more adequate cybersecurity. Connectivity is also a timely issue, as Millennials will be inheriting family wealth in the future and they demand immediate access to data without disruption and with more transparency. This digital transformation to virtual family offices will also allow for a leaner staff that can deploy resources more quickly.
The events of 2020 have led capital markets to affect businesses in different ways. Underwriting slowed for high-yield borrowers. Mergers were put on hold. Stock markets have been up and down, and a record number of securities and their values have been exchanged. As financial conditions improve, confidence combined with cheap credit will have companies seeking liquidity to get through the rest of the crisis. Corporations have been tapping into the public debt markets at high rates. While this generated profits at the start of the recession, bonds are less likely to be issued as businesses restore their reserves and establish liquidity that will be needed into the future.
For the rest of 2020 and into 2021, investment banking associated with M&A activity will continue to be tied to the economic recovery amid a softer deal pipeline. When the economy finally bounces back, there will be opportunity for a backlog of deals, boosting advisory revenues.
Data and Private Equity
In the time of COVID-19, certain private equity trends have emerged and are expected to be here to stay. People are still paramount, but how they work has changed. Data continues to be more important to deal making to determine the areas for greatest earnings impact. Datasets will track strategic movements and metrics within companies to gauge their performance. Remote workforces will allow competitive PE firms to source key financial talent from entirely new geographic regions. Firms are also expected to outsource more of their back-office work functions and instead focus on front-office responsibilities.
Ready to Sell?
If you are a business owner who is considering making a move, our M&A experts at Benchmark International would love to discuss how we can help with the sale, exit or growth of your company.READ MORE >>
Manchester-based facilities management provider, Tudor Group, has acquired Cardiff-based cleaning contractor, A Quality Service (AQS).
Established in 2011, AQS specialises in stadium cleaning, as well as providing commercial cleaning for a variety of customers from factories and offices to the NHS.
Tudor Group provides a wide range of commercial cleaning services to clients nationwide and has been doing so for the last 30 years.
The company has private equity backing from Foresight Group, who made its original investment in 2016. Since then, Tudor has scaled operations, introducing improvements to health and safety, finance and IT systems. The acquisition of AQS – on the back of a £1.1m boost – will allow it to grow revenues further.READ MORE >>
Benchmark International’s industry agnostic approach has proven to be informative during the Covid-19 epidemic. Interest in most of our client base has not declined and we are receiving queries from a wide range of parties.
Who are these interested parties and what is their investment approach? Analysing the data provides an interesting insight and some understanding of the shifting approach amongst these different categories of buyers.
• Listed Companies with their robust balance sheets are compelled to continue investing to meet forecast performance targets and stakeholder objectives. Generally, their acquisition mandates are governed by their investment committees where risk is a dominant factor. Turnaround and distressed assets are typically less attractive unless fulfilling a defined strategic need.
• Foreign Corporates from the Western to Eastern hemisphere still see South Africa as a stable foundation to expand through to Sub-Saharan Africa. South Africa’s well-developed IT and broadband infrastructure, advanced legal and banking sectors, safe aviation record, and access to a cost effective English-based labour pool facilitates business across the African continent. Themes of specific interest have emerged with a higher than normal volume of inbound enquiries for renewable energy, TMT, IT infrastructure and service as well as software businesses in particular.
• Private Equity in South Africa has grown and matured immensely over the last decade and remains one of the top acquirers/investee categories in the middle market for Benchmark international. Attached to the funds they raise are set acquisition criteria, investment limits and defined investment timelines where cash reserves must be spent. Similar to the listed segment, risk profiles are a key investment mandate consideration. During lockdown, Benchmark International has experienced a slight shift in the number of deals concluded towards those that have private equity components to them.
• Family Offices have shown resilience through the epidemic and continue to show interest in our opportunities. Their mandates are more flexible but are primarily based on where their strategic and financial input will maximise returns.
• Covid-19 has forced Large Private Companies to look at vertical integration of their supply chains. They also continue to seek to grow their market share through horizontal acquisitions and acquisitions of niche market opportunities.
• High Net Worth Individuals remain interested in growing their asset bases. They generally focus on opportunities in which they have existing investments and expertise and are able to achieve economies of scale.
Globally, Q1 2020 saw private equity have a robust start to the year. According to data from Mergermarket’s Global and Regional M&A Report 1Q20, global buyout activity remained at the same value as Q1 2019. This was reflected in Europe, with the continent having a strong start to the year due to ‘high profile defensive consolidation and continued private equity investment’, which equated to a 30.2% increase in deal value over Q1 2019.
Of course, this was before the pandemic, with a fall in activity in March and with the primary market for leverage loans shut down, the private equity market is unlikely to reach the levels of the start of the year in the months to come.
But how resilient is the private equity market anticipated to be?
If we look back to the recession of 2008, it does not paint a promising picture, as trust was completely lost in private equity firms. In 2007, buyouts represented 27% of overall M&A value in the US and Europe, which then dropped to 14% in 2009, due to lack of trust. Similarly, in 2019, over 25% of global deals involved a private equity firm, which does no bode well for buyouts in 2021. However, the current crisis is very different in nature to 2008 and buyout activity should remain resilient due to the record amounts of dry powder financial institutions have at their disposal.
European private equity demonstrates this with private equity activity as late as mid-March, with KKR announcing a 5bn USD takeover of recycling firm Viridor.
During the current crisis, exits may be muted – but that does not mean they will grind to a complete stop. For opportunistic buyers, there may still be targets in the coming months, particularly those in sectors immune to the current crisis, such as technology, business services and software. Companies thriving in the crisis – such as those in hygiene, home fitness, and home entertainment should also see a continued interest.READ MORE >>
Benchmark International has advised on the transaction between chartered surveyors, Dunlop Heywood, and estate agents, The Leaders Romans Group.
Dunlop Heywood is a chartered surveying practice specialising in rating consultancy and property management with offices in London, Manchester, Leeds, Newcastle and Belfast. Clients include Asda, Doncaster Rovers, Bradford City, Travis Perkins, Leeds Bradford and Dublin airports, and charities.
It is a renowned property consultancy that was established by founding partner Stuart Hicks in 2008, but the origins of the business can be traced back to 1832.
Leaders Romans Group is one of the UK’s largest property services groups following the merger of Leaders, Romans and Boyer in 2016 and is backed by leading private equity firm, Bowmark Capital. Starting in residential sales and lettings, the company has since expanded to offer a whole host of property services from planning to financial services and corporate property management. The company has 160 branches across the country and employs over 2,100 people.
Post-sale, Stuart and the senior team will remain with the business, which will continue to trade as Dunlop Heywood.
The senior teams at Leaders Romans Group and Dunlop Heywood are now working on an investment and development plan, which will ensure that Dunlop Heywood maintains its position as the leading business rates consultancy in the UK.READ MORE >>
Benchmark International is pleased to announce the transaction between Manor Renewable Energy and a consortium of investors led by Moulton Goodies Limited and Castle Mill Equity Partners Limited. The transaction also involved Manor Marine, a wholly owned subsidiary of Manor Renewable Energy.
Manor Renewable Energy was founded in 2013 and is the leading provider in offshore temporary power and engineering solutions to the wind farm industry. Manor Marine, which began trading in 1991, provides vessel construction and maintenance services.
The deal facilitated the exit of a founder shareholder and provides backing for the team to continue its high-growth plan. Going forward, the investors will support the existing management team with strategic and commercial expertise as the business seeks to broaden its offering by investing in its operations and maintenance division.READ MORE >>
Benchmark International is pleased to announce that it will be returning to sponsor the Real Deals Mid-Market event taking place on 24th January 2020 at the London Marriott Hotel, Regents Park.
In its eleventh year, Real Deals is a key event for private equity in the UK with hundreds of the most recognisable names in private equity attending, providing Benchmark International with a unique opportunity to showcase the opportunities it currently represents.
As well as networking opportunities, the event also includes panel discussions, on-stage interviews and exclusive case studies, with the event examining the futureproofing of the whole of the investment cycle to ensure the continuous success of a dynamic industry.
Do you want to be featured and showcased in front of leading dealmakers? Naturally, we present only a select number of companies for each event, so we would encourage you to contact us now to ensure your business is included.READ MORE >>
For many sellers, the notion of selling the business they built from the ground up to a private equity fund is unimaginable. Many have heard horror stories from their friends, perhaps read books about the pitfalls of private equity buyers, and may even have some personal experiences. While dealing with private equity funds can be problematic for sellers, they often also are the best, most logical buyer. They are well-funded, so there is little risk the deal will fall through because of the inability to fund. Also, today’s private equity funds generally will leave their portfolio companies to operate free of interference, only offering support, guidance, and growth capital. However, if unrepresented by a capable M&A advisor, sellers can run into many problems in the midst of a transaction with a private equity fund.
What are these pitfalls? Here are a few:
- There’s a pronounced gap between what is expected from the fund as it relates to data and what is readily accessible from the seller. How do you bridge that gap?
- Be aware that Private Equity math is very complicated. Will they bring leverage to the transaction? Where will that debt sit? Will it appropriately dilute their equity? What is a Net Working Capital Peg? How is it calculated? How can buyers use it to erode deal value?
- How do you know that the deal being offered is competitive with what is out there in the market? PE Funds buy companies for a living, so they are very shrewd negotiators.
- Due diligence in PE deals is very rigorous. While diligence is a fact of life in all deals, how do you know that a buyer's request is reasonable? How do you know that the timing of each diligence item won’t interfere with your business?
Fear not. An experienced and capable advisor can help you navigate through each of these obstacles. In this webinar, we will discuss the pros and cons of partnering with a Private Equity fund and pay particular attention to how best to handle the complexity these deals inevitably introduce.
In the latest report published by Experian regarding UK & ROI deal activity in the first half of 2019, trends have shown that the private equity market has continued to play an active role in M&A activity. While there was an 8% decline in the volume of deals funded by private equity compared to last year, 2018 was a particularly fertile year in the industry and PE houses have still been notably active in the market.
Here is a summary of private equity trends by region:
There was a private equity element in around 19% of all London deals, up from 17% in H1 2018.
Private equity In London has been increasingly active so far this year and, at the top end, six of the ten biggest deals of the year to date featured a private equity buyer. This included a consortium comprising Kirkbi (the Danish family investment vehicle that controls Lego), Canadian pension fund CPPIB and private equity house Blackstone, who agreed to acquire Merlin Entertainments, the leisure business behind Madame Tussauds and Legoland.
Elsewhere, satellite communications firm Inmarsat agreed to be acquired by a consortium including Apax Partners and Warburg Pincus in a £2.7bn deal, as well as TDR Capital’s £1.9bn deal to purchase BCA Marketplace, the company behind WeBuyAnyCar.READ MORE >>
The first half of 2019 has been strong for the Irish M&A market, according to William Fry’s Mid-Year M&A Review for 2019 in association with Mergermarket. While overall deal volume has dropped, value is up, while private equity and overseas investments have also been significant.
Findings in the report include:
Private equity is a major contributor to Irish M&A – Private equity deal value totalled €1.8bn in the first six months of 2019, a 74% increase from H1 2018, with private equity firms accounting for three quarters of overall deal value in H1 2019. Deal volume has also risen from 19 deals to 21 deals.
Likely contributors to this activity include the fact that Ireland will be the only English-speaking country in the EU once the UK leaves, an attractive prospect for North American companies looking to acquire in the EU. Mature private equity firms are also interested in Irish companies, buoyed by Ireland’s steady GDP growth, as this presents Irish companies as attractive deal targets. As well, with the $1.8tn of dry powder that private equity firms have access to, they are now looking to younger markets like Ireland to deploy this capital.
To add to this, the Irish government is making moves to support private equity investment in the country, approving the drafting of the Investment Limited Partnership Bill that aims to make the jurisdiction more attractive to fund managers.READ MORE >>
On the 12th November 2019 Benchmark International will be attending the AVCJ Private Equity & Venture Forum at the Four Seasons Hotel in Hong Kong.
The AVCJ Forum is widely recognised as the private equity industry’s ‘must attend’ event in Asia, and one of the industry’s leading events globally. It is both the world’s largest Asia-focused private equity conference, and the largest gathering of institutional investors/private equity LPs in Asia. It involves insightful presentations, thought-provoking discussions and networking opportunities with over 1,150 senior professionals.
Benchmark International is the only corporate financier to exhibit at the event, helping to promote its exclusive opportunities on a worldwide level.
Do you want to be featured and showcased in front of leading dealmakers? Naturally, we present only a select number of companies for each event, so we would encourage you to contact us now to ensure your business is included.READ MORE >>
Benchmark International’s South African office was proud to attend the unveiling of this year’s private equity survey conducted by the South African Venture Capital Association (SAVCA).
Once again, private equity in South Africa has demonstrated the robust nature of the local market by posting a significant increase in investment activity in 2018.
The survey reports the value of new and follow-on investments has reached R35.4 billion, more than double the annual average of R15.2 billion posted over the past decade.
The research has further revealed that Southern Africa’s private equity industry (comprising both government and private funds) boasted R171 billion in funds under management (FUM) as of 31 December 2018.
More pointedly, the facts allude to a significant spike in trade sales, which were the most popular transaction, equating to a value of R5.6 billion in the past calendar year.
This further solidifies the dynamic reputation of the local mid-market sector of the economy and bodes well for the near and mid-term investment cycle for South African business owners looking to grow, transform, or exit their businesses.
Additional key takeaways from the survey include:
- R171 billion in funds under management (FUM)
- R12.8 billion was raised in 2018
- 55. 5% of the funds have been earmarked for South African investments
- Real estate comprised 15% of the value of all unrealized investments at 31 December 2018, with manufacturing and retail accounting for 11.6% and 10.8%, respectively
- Average investment deal size increased to R43.3 million during 2018, from R41.5 million during 2017
To obtain the survey results, SAVCA, along with its research partner Deloitte, surveyed 47 managers, representing 82 funds, with a mandate to invest in South Africa and in other African markets.READ MORE >>
What is private equity?
Private equity (PE) is medium to long-term finance provided in return for an equity stake in a company. The objective of the PE company is to enhance the value of a company in order to achieve a successful exit (i.e. sale).
Where do PE firms get their money?
PE firms generally invest funds they manage on behalf of groups of individuals, pension funds, and other major organisations.
What types of companies do PE firms invest in?
PE firms look for companies that can offer a lucrative exit within three to seven years. Therefore, the company has to be large enough to support investments from the PE firm and have the potential to offer large profits in a relatively short timeframe. This means that PE firms buy companies with strong growth potential, or companies that are currently undervalued because they’re in financial difficulties.
How are PE fund managers compensated?
PE fund managers receive their income via two channels – management fees and carried interest.
A management fee is paid by the limited partners (the people who provided money to invest) to the PE firm to pay for their involvement. The fee is calculated as a percentage of the assets to pay for ongoing expenses such as salaries.
Carried interest is a percentage of profits that the fund gains on the investment. This compensation helps to motivate the PE fund managers to improve the company’s performance.
What is a platform company?
A platform company is the initial acquisition made by a PE firm in a specific industry. Typically, a platform company has a strong management team to drive the company forward and a proven track record in a specific industry. This company is the foundation for subsequent companies acquired in the industry.
What is a bolt-on company?
A bolt-on company is in a trade which the PE firm has already invested and is added on to one of its platform companies. The fund will look for bolt-ons that provide competitive services, new technology or geographic footprint diversification, as well as companies that can be quickly integrated into the existing management structure. Typically, a bolt-on company is smaller than a platform company and has minimal infrastructure in terms of finance and administration.READ MORE >>
If you’ve decided to embark on an MBO, you might have asked yourself, how is this funded? Generally, members of the buyout team are required to invest a sum of personal money into Newco but it would be unusual for them to fund the whole transaction. The equity provided by the management is necessary to demonstrate their commitment to the transaction, therefore it needs to be meaningful, yet it does not have to be too vast – typically representing 6-12 months salary. So, how is the remainder of the MBO funded?
A common option to fund an MBO, seller financing is where the management team asks the seller to help fund the MBO. This is also known as deferred consideration, as the seller is deferring a proportion of their payment of the purchase price until after completion. While the seller would more than likely prefer the consideration paid in full on completion, often lenders may request that a portion of the sale is financed by the seller, as it demonstrates that the seller has confidence in the management team and the company going forward.READ MORE >>
A newly released report from Mergermarket concerning M&A trends in the first half of 2019 has shown that M&A in the technology sector has reached new highs. So far, 1,307 deals have been recorded in the technology sector this year, equating to 15.9% of deal activity by volume in 1H 2019, its highest half-yearly share on Mergermarket record.
In fact, in recent years tech M&A has reached record levels but what are the reasons for the industry’s popularity?READ MORE >>
Benchmark International is pleased to announce that it has successfully facilitated an £8m deal between Total Resources and Mercia.
Founded five years ago after Managing Director, Les Thompson, acquired the assets of Lincolnshire-based Traffic Control and Management, South Tyneside-based Total Resources now operates across five depots throughout the UK, employing around 140 people and offering all aspects of traffic management.
A rapidly growing business, Total Resources was the winner of the fastest growing small business award at the annual Fastest 50 event at the end of 2018. Turnover has soared on a local level due to work at major concerts for Rihanna, Take That, and Bruce Springsteen, and the forthcoming Spice Girls tour, all at Sunderland’s Stadium of Light.
Mercia, provider of both equity and debt finance to small businesses based in the UK, will now allow Total Resources to expand throughout the UK.
The £8m deal for Total Resources has been a syndicated investment across three different funds bringing its venture, debt and growth investment teams together in a single transaction.READ MORE >>
There has been a steep incline in private equity investors buying SaaS (software as a service) companies over the last five years with PE firms investing in, recapitalising, and outright buying numerous SaaS companies. In fact, private equity accounted for 2.5% of all private equity portfolio acquisitions in 2018.
So, what are the reasons for private equity firms investing so heavily into SaaS companies?READ MORE >>
Benchmark International is pleased to announce our exclusive attendance at the national ACG Intergrowth 2019 conference on May 6th-8th in Orlando, Florida. This is a valuable opportunity where we meet with thousands of well-funded private equity deal-makers and draw their attention to the opportunities we are currently representing.
We have had major success at this event in the past with offers on over 75% of the businesses we featured. This creates competitive tension between financial buyers and strategic buyers.
ACG’s annual event is specifically designed for those on the hunt for private capital in the middle market. With over 2,000 registered attendees and $189 billion of investable capital, this is not your typical meet-and-greet. We currently have 60 one-on-one meetings scheduled with business development team members (the people who analyze Teasers and CIMs) of these PE funds.
Would you like to be showcased to leading dealmakers with strong, acquisitive appetites? Naturally, we present only a select number of companies for each event, so we would encourage you to contact us now to ensure your business is included.
*All opportunities must be submitted by April 30th, 2019.
READ MORE >>
Private equity has remained robust in the first quarter of 2019, with deal values in the first three months of 2019 showing a quarter-on-quarter rise of 3.6% to US $202.2bn.
On the flip side, buyout activity did drop marginally; however, take-private transactions conducted by private equity firms reached their highest Q1 value since 2013 – this was driven by the top two buyouts of the year so far – both made by US-based Hellman and Friedman. The private equity firm bought US software developer Ultimate Software Group for US $11.8bn (the fifth largest private equity buyout in the TMT sector on Mergermarket record), as well as making an offer of US $6.4bn for German real estate and automotive digital marketplace, Scout 24.READ MORE >>
Refinitiv has announced the findings of its annual Deal Makers Sentiment Survey conducted by Greenwich Associates – a survey which provides a quantitative assessment of M&A related and capital market activity in the year ahead.
The survey has revealed that, despite market turbulence, reassurance has been offered in terms of M&A and capital market trends as the deal making professionals surveyed are cautiously optimistic for the year ahead.READ MORE >>
For the last decade, private equity players have held the driver’s seat in looking at, winning auctions for, and acquiring lower middle market businesses in the United States. But early results for 2019 indicate this trend may be at an end. The family office has come to the fore and appears poised to become the dominant bidder and buyer in this market.
- Private equity funds have mandatory exit time frames imposed by their organizational documents and their agreements with their investors. A typical private equity fund has a life of about ten years so it must buy, grow, and then resell all of its investments in that time frame. Family offices, on the other hand, typically have no time horizon for re-selling. They are more often “buy and hold” acquirers.
- Private equity funds primarily invest “other people’s money”. Family offices invest their own money. While a family office will typically have a management team working for the capital provider and that has the appearance of a private equity-style management company, the management team’s relationships, compensation, career path, and rigidity of investment criteria are each vastly divergent from those of private equity funds.
- Private equity funds operate under some limitations as to the breathe of their investments - a tech fund can’t buy farmland – but they do seek diversification in very broad terms within these limitations. Family offices tend to have a narrower focus. They hew close to the Warren Buffet mantra that investors should only buy stocks within their "circle of competence." A family office that has made money in landscaping is likely only to look at landscaping businesses and if the family made its money in commercial landscaping, to only look at commercial landscaping businesses. As a result, they tend to come across to Benchmark Internationals’ clients as more knowledgeable about their business.
- Also owing to their tighter range of interest and the fact that they do not have outside investor to whom they owe fiduciary duties, they tend to move faster, perform less diligence, and produce shorter contracts. Over the last ten years, as multiple have increased, private equity funds and trade buyers have ratcheted up their due diligence to levels our clients find very painful. This is understandable as higher multiple mean more risks for these buyers. But family offices seem more comfortable with this heightened risk and rely on their expertise in the narrower industry to alleviate the risk other buyers reduce via diligence.
- Family offices also tend to use less debt in their deals than do private equity funds. Perhaps as a result of this fact, or maybe not, they tend to use their existing debt facilities to provide the extra leverage needed to put in competitive bids. As a result, the lenders due diligence is either greatly reduced or eliminated from the acquisition process. This also increases the speed to close and reduced the stress for sellers. When a private equity fund, or even a typical trade buyer, sets up a new transaction, they also set up a new lending arrangement and the bank providing the debt sends in its own diligence team to investigate the deal and the company being acquired. Double the diligence, double the fun!
- Because a family office’s money is coming from one source as opposed to many, they tend to seek out smaller opportunities than do private equity funds. There are some very small private equity funds these days and there are also some rather large family offices now. But in general, the managers at a family office are more accustomed to dealing with smaller business, more owner-operated businesses, and businesses with less data to share during the due diligence process. As a result, our clients often find them easier to work with and have more interest in working with them on an ongoing basis following the closing.
- Private equity funds often have a mechanism in place to have their “deal costs” covered by third parties. Deal costs primarily consist of due diligence costs, legal fees, and travel. It is not uncommon to see a private equity funds deal costs amount to over 5% of the transaction value. Family offices, on the other hand, have no one to turn to for their deal costs. This has two favorable results for sellers. First, they spend less on the process, making it shorter and easier. Second, their certainty of close is higher. While private equity funds can somewhat mitigate the costs of a “blown deal,” family offices only have one pocket to pull from – their own (or, in other words, their boss’s personal pocket).
- The characteristic that is probably self-evident by this point is the higher certainty of close. Family offices know the market batter, they have less bandwidth to use time inefficiently, they have more discretion, they are less reliant on banks, and they don’t want to waste their own money on blown deals. They are thus more cautious, put in fewer bids, and call things off much sooner than other buyer types. In short, if they are proceeding, they are more serious than they average buyer.
- They are harder to find. They do not have to register with the SEC. There is no secret club they belong to. They are too short-handed to attend many conferences. Many even enjoy anonymity and don’t even have websites.
This last characteristic is what makes selling to family offices tricky. Any broker can produce a Rolodex of private equity funds. In fact, an impressive one could be produced from scratch in a matter of hours. Furthermore, because their focuses tend to be so narrow, the first 100 family offices in the Rolodex would probably not be a good fit for any given business but a similar list of private equity funds would probably produce a few interested buyers in most any growing business. A broker is either into the family office world or they are not. There is no break through moment in this regard. It requires years of dedicated effort to identify and establish relationships with these hidden gems. It requires dozens of researchers and outreach efforts. It also requires having an inventory of businesses for sale that keeps these buyers interested. Brokers focused on larger deals and boutique brokers lacking global reach simply can’t devote the time and energy necessary to gain access to this strengthening pool of buyers. Only brokerages such as Benchmark International have the capability to do so and many of those with the capability have simply not made the effort.
Our family office relationships are continually growing and in 2019 these efforts have rewarded our clients handsomely. Keep your eyes open. I bet you’ll soon start to see the Wall Street Journal talking about family offices and the rise of the family office. When you do, remember that you heard it here first and Benchmark International is your gateway to those buyers.READ MORE >>
When you are ready to take the steps to grow your business, you need to determine the funding you can receive to help make it happen. Many different funding options are available, but how do you know which is right for you?
The first method that comes to mind for many people is borrowed funds. There are multiple options for gaining funding through lenders, including Small Business Administration (SBA) loans, traditional bank loans, micro-loans, and online business loans. SBA loans and traditional bank loans typically take months to secure and the repayment terms can run up to twenty-five years with interest rates varying. Micro-loans and online business loans can take less time to secure but they carry higher interest rates than bank loans and may have pre-payment penalties. Additionally, even if you get a loan, business growth is not guaranteed. If the borrowed funds are not used wisely, you can end up paying back money with interest that never helped you make any additional money in the first place, just digging you further into debt.
Another method of funding is retained earnings. This approach uses a combination of operating cash flow and profits left in the business to fund your growth plan. Using retained earnings avoids adding debt and interest payments. You also stay in full control of your company by not involving outsiders in your business. However, use of retained earnings can be a very slow process if you must wait and build up the funds you need. You also run a major risk of not having the finances necessary to keep your company operating from a healthy perspective.
Private equity is a way to acquire funding by selling shares in your company to outside investors. Through this long-term growth strategy, you avoid getting involved with a bank and you minimize your risk. With venture capitalists or angel investors, you also gain the benefit of added expertise and personal interest in the success of the business. One aspect of using equity capital is that shareholders will be expecting a return on their investment. This could result in the consideration of a merger with another company or having the company acquired by a larger company.
Many companies choose to use mergers and acquisitions strategies because the growth is more imminent. Instead of waiting years for the business to grow itself, merging with another company can double the company’s size, reduce competition, and increase profitability. Merging with another business also gives you the advantage of acquiring intellectual property and expanding innovation.
Working with an experienced growth partner such as Benchmark International will help you figure out the best direction for you, whether it is a merger, an elevator deal in which you retain a stake in the business, a cash-on-completion arrangement, or a complete exit strategy. There is a range of options available depending on how you want to see your company transformed. The best strategy will also depend on the state of your company and the current market. It is important that there is careful consideration of the cultural fit between the two companies and a firm understanding of how to manage expectations. Having the right connections around the world in various sectors is also a key attribute you want in your representation because it opens up a wealth of opportunities.
The right partner can maximize value and make your vision a reality for the business that you have worked so hard to build. Benchmark International can be relied upon as a leader in the global landscape to get you the results you deserve.READ MORE >>
Benchmark International is attending the Real Deals Mid-Market conference on the 5th and 6th February at One America Square Conference Centre, London.
If you are interested in the vast number of global opportunities that Benchmark International has to offer, make sure to come and speak to the Benchmark International team.READ MORE >>
Benchmark International is pleased to announce that it will be returning as pre-eminent sponsors to the Real Deals Mid-Market event in February 2019 for the sixth year running.
The event is to take place at the America Square Conference Centre in London and is attended by the UK and Europe’s most influential private equity professionals, providing an opportunity to network with hundreds of dealmakers, drawing attention to the opportunities currently represented by Benchmark International.READ MORE >>
Benchmark International, has successfully negotiated the sale of its client, Enroute Networks, Inc. (“Enroute”) to Dynamic Quest (“DQ”), a portfolio company of Spire Capital Partners (“Spire Capital”), a New York based private equity firm.
Founded in 2001 and based in Marietta, Georgia, Enroute is a leading information technology services provider managing the IT needs and security challenges of small to medium sized businesses. The company focuses on being a value-added reseller and cloud provider of computer networking, telephony, and systems solutions, as well as a fully capable IT managed service provider (MSP) of all solutions it implements. Today, the company employs over 15 people serving customers across the United States with a focus on the Southeast.
Headquartered in Greensboro, North Carolina, DQ is a managed service provider offering IT and cloud services to enterprises and businesses. Founded in 2000, DQ’s services include hosted cloud services, disaster recovery, managed IT, service plans, software maintenance and development, application support, virtual CIO and IT security services. In 2017, the Company serviced over 225 customers across a wide variety of market verticals. Dynamic Quest currently has 119 full time employees and satellite offices in Winston-Salem and Cary, North Carolina and Clark, Philippines. Spire Capital has supported DQ’s strategy of pursuing acquisitions to broaden its geographic reach and scale, while complementing its strong organic revenue growth. The acquisition of DQ marked the seventh platform investment in Spire Capital Partners III, and the strategic acquisition of Enroute represents an excellent addition to this.
Founder & CEO of Enroute, David Hampson, stated, “Benchmark International played an instrumental role in identifying an acquirer whose vision aligned with our own. The team brought multiple offers to the table, and created a competitive bid process among some of the top names in the industry. A big thanks to the Benchmark transaction team for the extraordinary effort in making this deal a reality.”
“It was a pleasure working with David (Hampson) from the early stages of his relationship with Benchmark through to closing. We received excellent feedback from the market early-on and were able to orchestrate a process that resulted in multiple offers and ended with an ideal acquirer sharing many of Enroute’s same core values,” said Trevor Talkie, Senior Associate at Benchmark International. “Enroute is a compelling addition to DQ under Spire Capital’s growing managed IT services platform, and we are truly honored to have worked alongside Mr. Hampson toward this successful outcome.”
Leo VanderSchuur, Director at Benchmark International added, “It was a pleasure to represent Enroute in this transaction, and we’re extremely pleased with the outcome. On behalf of Benchmark International, I’d like to wish both parties the best of luck moving forward.”
There has been a surge in US private equity (PE) dealmaking throughout 2018 – 3,501 deals worth $508.8B closed, with the majority of transactions occurring in the third quarter. But what have been the trends in this industry and what has caused the increase in dealmaking?READ MORE >>
If you are considering the sale of your company, then you may have also thought about what type of acquirer you would like to approach. You may have considered a private equity firm (PE firm) as an attractive prospect, as there are a range of benefits from partnering with PE firms such as the amount of funding available, their active involvement in the company and their expertise in creating value.
There are, however, certain criteria that PE firms look for when sourcing acquisition targets and the following tend to be what they will look for in a portfolio company:
READ MORE >>