marcus archer - clearwater...

The M&A landscape and maximising the value of your business

Mark Maunsell

Associate Director

Office tel: +44 845 052 0300

Email: [email protected]

Marcus Archer

Partner

Office tel:+44 207 632 4444

Email: [email protected]

mailto:[email protected]

mailto:[email protected]

CLEARWATER INTERNATIONAL | JUNE 2017 Page 1

Our DNA

• Partner led and independent

• Experienced teams

• Sector focused

• International reach – 15 offices globally

• Tailored approach (research driven)

• Deal originators

• Private equity heritage

• Entrepreneurial

Our deals

• Mid cap

• Over 100 per year

• €20 to €250m enterprise value

• Over €5.0 billion of capital raised per annum

Clients

• Private Equity

• Privately owned businesses

• Corporates

Our services

• M&A

• Debt Advisory

• Special Situations

Clearwater International: A leading pan-European mid-cap focused corporate

finance boutique

http://www.google.co.uk/url?sa=i&rct=j&q=&esrc=s&frm=1&source=images&cd=&cad=rja&docid=cmCbl3EG_Btl6M&tbnid=z_apcarvx_AKmM:&ved=0CAUQjRw&url=http://www.gillmarineonline.com/&ei=UROTUpKEEIKe0QXNioCYAQ&bvm=bv.56988011,d.d2k&psig=AFQjCNEHXxTA_sgG873ltJQFFPJ4MWag5g&ust=1385456786801326


http://www.tlgbrands.com/

http://www.tlgbrands.com/

http://www.palatinepe.com/2013/02/11/playnation/

http://www.palatinepe.com/2013/02/11/playnation/




French group specialising in full

service fire detection and

extinguishing businesses

Clearwater International advised

Clarkson on its cross border sale

CLARKSON SAFETY

Fast growing workplace vending

suppliers

Clearwater International advised on the

cross-border sale of the company to

Eden Springs

KAFEVEND HOLDINGS

Leading security systems provider

Clearwater International advised the

company on its £13m sale to Servest

UK

STAG SECURITY SERVICES

Contract catering company focussing

on the education, care and welfare

sectors


shareholders of Waterfall on the

secondary buyout by LDC

WATERFALL SERVICES

Property-related services company

Clearwater International advised on the

sale of the company to Places for

People

RESIDENTIAL MANAGEMENT GROUP

Franch-based provider of contract

catering services

Clearwater International advised Elior

on the disposal of its Dutch activity to

Compass

ELIOR NETHERLANDS

UK-based provider of technical

services


shareholders of Imtech UK on its cross-

border sale to EDF Energy Services

IMTECH NV UK

Leading technical maintenance

business within the UK retail floor

cleaning market


shareholders of Floor Cleaning

Machines on its cross-border sale to

Nilfisk

FLOOR CLEANING MACHINES

Provider of 24/7 emergency response

and repair for locks and glazing


Evander’s shareholders, LDC and

Bridgepoint Development Capital on the

sale to vacant property services

specialist VPS

EVANDER

Specialists in securing, maintaining

and managing properties


shareholders on the management

buyout

SITEX ORBIS

Supplier of software services &

applications to the energy and

operational efficiency markets

Clearwater International provided buy-

side financial advice for LDC’s backing

of the MBO of Stroma

STROMA

Fresh food procurement services

provider


leading procurement provider PSL, on

its sale to world leader in quality of life

services, Sodexo

PSL PURCHASING LIMITED

Leading provider of cleaning

services

Clearwater International advised Prodef

and Dosim on the disposal of Sin &

Stes to Elior

SIN & STES

Spanish security systems and

services company


company on raising funding to buy

two companies dedicated to alarm

systems

SEGURIDAD LPM SL

Security and monitoring services

provider

Clearwater International advised TCR

Capital and ICG on the disposal of

Générale de Protection to Stanley

Work

GENERALE DE PROTECTION

A selection of our facilities management credentials across Europe


• Mega-deals have slowed following a peak year in 2013

• Leading players are focussing M&A efforts on fast growing emerging economies

• Convergence between real estate consultancies and facilities management companies

• Buyers are drawn to niche in-fill acquisitions with higher margins

• Leading corporates face both internal and market issues which is hampering appetite for acquisitions

• Cross-border activity remains robust with US and French buyers particularly attracted to the UK

• A selection of companies have listed on AIM and are implementing buy & build strategies

• Private Equity continues to be fairly selective about which opportunities to pursue

• High valuations in attractive sub-sectors

A number of key themes emerge when reviewing the M&A data in the facilities

management industry


Why? Value Enhancers Value Drags

• Stagnant organic growth

• Strong balance sheet

• Synergies

• Diversify / broaden service

matrix

• Eliminate competition

• Time lag to develop

organically

• IP

• Geographic expansion

• Attractive niche

• High growth – revenue and

profitability

• Frameworks

• Technology

• Long term contracts with

strong visibility of earnings

• High and stable margins

• A committed management

team

• High contract retention

levels

• Short-term regulatory /

political uncertainty

• Over reliance on a couple

of large contracts

• Downward pressure on

margins

• Weak management team

• Key management figures

looking to exit

• Lumpy project based

revenue

• Customer churn

M&A continues to form a fundamental part of corporates growth strategy, however

careful consideration must be given on how best to position a business for sale


-79%

27%

-31%

-10%

-43%

-37%

-100 -80 -60 -40 -20 0 20 40

Share price movement since 2013 (%) Share price movement since 2013 (%)

-100%

-80%

-60%

-40%

-20%

0%

20%

40%

60%

80%Serco plcCapita plcMite Group Plc

Facilities management companies have struggled in the face of austerity which was

supposed to bring increased opportunity


This has led to companies restructuring operations which in turn is creating

opportunities for M&A

Dec-16

Rentokil exits European workwear business to Haniel - €520mThe company supplies uniforms and other garments in 10 European markets, including

Germany and the Benelux countries

Jul-16

PHS sells Data Solutions business to Restore Plc - £87.5mPHS Data Solutions is the second largest provider of document shredding services in the UK

as well as having a significant records management business

Jun-16

EQT acquired the Building & Facility segment of Bilfinger - €1.2bnThe largest real estate services provider in the DACH region and a leading player in the UK

through GVA Grimley

Sep-15

CBRE acquires the GWS business of Johnson Controls - €1.2bnGWS provides Integrated Facilities Management solutions for major occupiers of commercial

real estate

Jan-15

ISS acquired GS Hall Plc’s UK and European operations - £53mA technical services company focused on mechanical and electrical engineering, energy

management and compliance

Jul-14

Cofely acquired the UK FM business of Lend Lease – n/dLLFM currently provides a range of FM services across the UK and Ireland, with particular

focus on healthcare, education, government and retail

Feb-14

Interserve Plc acquisition of Rentokil Initial Facilities Services - £250m

Initial Facilities comprises the facilities services businesses of the Rentokil Initial Plc group,

employing approximately 25,000 people in the UK, Ireland and Spain

Sep-13

Hochtief sold its Service Solutions business to Spie SA - €250m

A leading facilities and energy management business with sales of €700m and employing

nearly 6,000 people

Oct-13

Carillion acquired John Laing Integrated Services (JLIS) – n/d

Carillion has acquired infrastructure investment group John Laing’s facilities management

business

Aug-13

GDF Suez acquired Balfour Beatty’s UK FM business - £190m

Workplace provides facilities management services to hospitals, schools and local

government establishments


Soft Facilities Management Hard Facilities Management Housing Associations Specialist

A broad buyer landscape with a number of new entrants that are looking to extend

their reach through M&A

GEOGRAPHICAL. CAPABILITY VERTICALS CREDIBILITY CLIENTS SCALE


Company Name Country Ownership Turnover Area Date Target Details

ABM Industries Inc USA Listed £4,127m

Soft FM 2017 8 Solutions Data centre cleaning services

Hard FM 2016 Westway Services A provider of technical facility services and engineering

Soft FM 2014 GBM Support Services Cleaning, security, building maintenance and waste services

Restore Plc UK Listed £129m

Soft FM 2017 The ITAD Works Limited IT asset recovery and recycling services

Soft FM 2017 Reisswolf London Secure shredding business

Soft FM 2016 PHS Data Solutions Paper shredding and storage

Soft FM 2015 Wincanton Records Management Document and data storage, archiving, and destruction services

Soft FM 2015 The Data Imaging & archiving Co Document management services

Soft FM 2015 ITP Group Holdings Limited UK's leading collector of empty printing cartridges

ServestSouth

AfricaPrivate

£284m

(UK)

Soft FM 2017 PRO-CHECK Northern Ltd Pest control specialist

Soft FM 2016 Catering Academy A contract catering company that work in education and business

Hard FM 2016 Arthur Mckay & Co Ltd Mechanical and electrical services

Soft FM 2016 Accuro Catering A national contract catering company

Hard FM 2015 Llewellyn Smith Ltd Energy compliance / management

Marlowe Plc Listed

Hard FM 2017 Advance Environmental Ltd Provider of water treatment and hygiene services

Hard FM 2017 Alpha Peerless Fire Systems Ltd Fire protection services provider

UK 17.6 Hard FM 2017 BBC Fire Protection Ltd Fire protection services to more than 700 customers

Hard FM 2016 Titan Fire & Security Ltd Fire protection services based in Uxbridge

Hard FM 2016 Hentland Ltd Fire protection and security services

Bilby Plc UK Listed 50.0

Hard FM 2016 Spokemead Maintenance Ltd Electrical installation, repairs and maintenance

Hard FM 2016 DCB (Kent) Limited Refurbishment and maintenance services to housing associations

Hard FM 2015 Purdy Contracts Ltd A gas and electrical contractor

A diverse mix of both international and domestic buyers, led by Restore Plc which

has been the most acquisitive corporate in the UK in the last 3 years


5%3%

8%

3%

76%

5%

France Germany South Africa Switzerland United Kingdom USA

18%

2%

2%

5%

64%

9%

France Germany India South Africa United Kingdom USA

Deals by geography (UK Target) - 2013 Deals by geography (UK Target) – Last Twelve Months

45

Deals

37

Deals

Increasing levels of cross-border M&A activity as leading UK headquartered facilities

management companies focus on organic growth


Cross-border M&A activity in the facilities management sector continues to be

dominated by French headquartered buyers

2013

GDF Suez acquires Balfour Beatty

Workplace Ltd

Workplace provides facilities

management services to hospitals,

schools and local government

establishments

2014 2015 2016 2017

Elior acquires Lexington Catering

Limited

Lexington provides contract catering to

corporates primarily in the financial

services sector

Spie S.A acquires Scotshield Fire

and Security

A provider of fire detection, security

alarms and access control installation

maintenance services

Spie S.A acquires Leven Energy

Services Limited

Leven is utilities contractor supporting

Distribution Network Operators

ID Verde SAS acquires The

Landscape Group Limited

UK-based landscaping and grounds

maintenance company

VINCI acquires Powell Engineering

Ltd

A UK based electrical engineering

specialist

SPIE acquires Environmental

Engineering (UK) Limited

HVAC, M&E engineering services

within the food and beverage industry

SPIE acquires Triosgroup Ltd

Triosgroup provides facility and

property related technical services

Sodexo acquires Peyton and Byrne

Ltd (catering contracts)

The public catering contracts business

of P&B

Sodexo acquires PSL Ltd

A food procurement specialist

Elior acquires Waterfall Services Ltd

A education focussed contract catering

company

Samsic Group acquires JPC

Cleaning Services Ltd

A provider of cleaning solutions in and

around London

ID Verde SAS acquires Quadron

Services Limited

A grounds maintenance company

engaged in providing services to LA’s

Elis S.A. acquires Berendsen Plc

A company engaged in the laundering

and maintenance of textiles

EDF Energy Services acquires

Imtech Group

A leading engineering services

company and provider of technical

services to construction, industrial and

public sector clients in the UK and

Ireland


Spie SAS

Small-cap

Elior Group Aramark

% M

ovem

ent

-100%

0%

100%

200%

300%

400%

500%

600%

Large-cap

Bilby plc Marlowe Plc

-40%

-20%

0%

20%

40%

60%

80%

100%

120%

140%

ISS A/S

Data as at 15th June 2017

Recently listed large-cap facilities management companies have performed well,

however small-cap stocks continue to be more volatile


2013 – UK Target M&A Last Twelve Months – UK Target M&A

45

Deal

s37

Deal

s

Private equity activity in the sector has ramped up and now plays a fundamental role

in driving M&A

18%

82%

Private Equity Strategic Buyers

8

37

8%

92%

Private Equity Strategic Buyers

3

34


Pros and Cons Private Equity Investments

45

Deal

s37

Deal

s

Private equity is interested in deploying capital in the facilities management sector,

however a number of failures continue to make them approach with caution

Private equity funds offer a credible alternative to a trade

sale

An overhang of funds in conjunction with buoyant debt

markets allows private equity funds to be extremely

competitive when it comes to valuation

Deals can be structured with follow-on capital for further

acquisitions

Financial investors can provide flexibility in structuring a

deal to accommodate various shareholders

Investors are able to add value through a long track record

of investments, often in the sector

Private equity funds are motivated by the return on

investment

Selling equity to a third party means relinquishing control

of the business

A number of historical failures in the sector reduce

appetite

Modest trade appetite for M&A makes it more difficult for a

private equity investor to exit. 2014 20162015 2017

≤£2

0m£2

0m-£

50m

£50m

-£20

0m≥

£200

-500

m


Businesses of scale, achieving strong growth and that are often underpinned by

technology continue to achieve the highest multiples

8.8x

9.5x

7.6x

6.3x

7.1x6.6x

10.0x

7.1x

6.0x6.5x

6.1x

11.2x

9.5x

Source: Mergermarket and CWI Intelligence

Soft FM Hard FM Technology

Enterprise Value

£70m

£52m

£13m

£60m

£4m£11m

£2,170m

£78m

£22m

£16m

£53m

£8m

£50m

xxx


In summary the UK is a mature, stable, but competitive market, with a growing

number of deals due to international acquirers targeting the UK

• M&A deal levels will remain robust with a continued focus on lower-mid market transactions

• FM companies will increasingly look to either partner with or acquire technology to innovate and deliver

new value propositions

• International acquirers will continue to be drawn to the mature and stable UK market, aided by a

favourable exchange rate

• Non-core disposals will drive the larger deals in the sector

• A high level of private equity investments in 13/14 will result in a number of businesses coming to market

over the coming 12 months

• Private equity will be drawn to tech-enabled or differentiated propositions

• EBITDA multiples will remain at similar levels, driven by buoyant debt markets and strong balance sheets

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