Business Services Sector Comment – July 2015

Dato

One sector that has seen a huge level of consolidation over the last two years, and is showing no signs of slowing, is the engineering consultancy market. In August last year, Clearwater International reported on a number of mega deals in the sector and the double digit multiples being paid for attractive assets. In June 2015, a further transformational deal was announced as Sweco AB acquired Amsterdam-based listed company Grontmij NV in a transaction valued at €354m.

Sweco AB – a Swedish consulting company in the fields of construction, architecture and environmental engineering – has continued on its aggressive acquisition strategy and, subject to the deal completing, will assume the position of the leading engineering consultancy in Europe based on revenue. The deal will see the combined group report an annual revenue of approximately €1.7bn (Sweco €1bn and Grontmij €0.7bn), leapfrogging Atkins with €1.2bn and Aecom + URS with €1.1bn. Furthermore, Sweco has already publicly stated its intention to make further acquisitions as the group looks to build on its strong platform across Northern Europe and grow its revenue further.

There is high demand for quality businesses that add capability, geographic presence and sector specialisms with corporates continuing to pay a premium for such assets. The acquisition of Hyder Consulting plc at an EV/EBITDA multiple of 11.7x is just one example, but Sweco’s acquisition of Grontmij appears to be even more racy at an adjusted LTM EV/EBITDA multiple for Q1 2015 of 14.1x. It is, however, worth noting that Sweco has identified €27m of synergy savings from the acquisition and 90% of this is expected to be fully realised in the first four years after completion.

At Clearwater International, the consultancy sector is an area we know only too well having advised on in excess of 8 deals. We expect to see a sustained high level of M&A activity which will be dominated by leading players turning to M&A in order to build truly end-to-end global solutions. We also see tuck-in acquisitions forming a key part of M&A strategy as corporates look to plug geographic holes and build niche capabilities in attractive markets.

 

Notable Business Services Deals

GHD Pty Ltd, the Australia-based company engaged in providing engineering, architecture and environmental consulting, has merged with GHA Livigunn Ltd, the UK-based consulting engineering business serving the water, nuclear, power, waste, bioenergy and chemical sectors, for an undisclosed consideration. GHA Livigunn generates annual revenues of approximately €13m and has a workforce of more than 160 employees.

Global University Systems BV, the Netherlands-based company engaged in providing education and training, has acquired The University of Law Ltd, the UK-based educational institute which provides legal education for students and professionals, from Montagu Private Equity LLP, the UK-based private equity firm, for an undisclosed consideration.

CH&Co Catering Ltd, the UK-based contract catering services provider, has merged with Host Management Ltd, the UK-based provider of catering services, for an undisclosed consideration.

In a transaction managed by Clearwater International: Cordant Group plc, the UK-based company engaged in providing recruitment, security, cleaning and support services, has acquired Staffgroup Ltd, the UK-based company engaged in recruitment for technology and Oil & Gas companies.

Belvoir Lettings plc has signed a conditional agreement to acquire Newton Fallowell Ltd, a UK-based company that operates as a real estate agency.

Weightmans LLP, the UK-based law firm, has agreed to acquire Ford & Warren Solicitors Ltd for an undisclosed consideration.

The creditors of Cory Environmental Ltd, the UK-based provider of waste management services, have agreed to acquire the company via a debt equity swap. As per the terms of the agreement, this transaction will reduce Cory Environmental’s debt from €990m to €570m and maturities will be pushed back to December 2019.

Menzies Distribution Ltd – the UK-based provider of marketing, logistics and delivery solutions to clients in press, travel and tourism sectors and a subsidiary of John Menzies plc, the listed UK-based logistics company – has acquired AJG Parcels Ltd, a UK-based parcels delivery firm.

The management of Environmental Resources Management Ltd (ERM), the UK-based company providing environmental, health, safety, risk, social consulting and sustainability-related services, has agreed to acquire the company in a management buyout transaction backed by OMERS Private Equity Inc (OPE) and Alberta Private Equity Group, both Canada-based private equity firms, for a total consideration of €1.6bn.

VPS Holdings Ltd – the UK-based provider of protection and management services for vacant properties and a portfolio company of PAI Partners, the France-based private equity firm – has acquired Redfields Landscaping & Design Ltd, the UK-based grounds care and landscaping service provider, for an undisclosed consideration.

KPMG LLP has acquired Boxwood Ltd, the UK-based management consultancy firm, for an undisclosed consideration.

Mattioli Woods plc has agreed to acquire Boyd Coughlan Ltd for €10m. Mattioli Woods, a listed UK-based company headquartered in Leicester, is a provider of wealth management and employee benefit services.

Primary Capital Ltd, the UK-based private equity firm, has acquired an undisclosed majority stake in MSIS Group – a UK-based provider of cleaning, asset maintenance and waste management equipment & services to the oil and gas, utilities, distilleries, construction and civil engineering industries – from Maven Capital Partners UK LLP for a consideration of €28m.

Gallagher Bassett International Ltd – the UK-based company engaged in providing an integrated claims management and risk management service and the subsidiary of Gallagher Basset Services Inc, the US-based third-party administrator providing risk management solutions to organisations – has acquired Countrywide Accident Assistance Ltd, the UK-based company engaged in providing claims administration services to insurers, brokers and businesses.

Towers Watson & Co has agreed to merge with Willis Group Holdings plc. Towers Watson & Co is a listed US-based company that offers human capital and financial consulting services. Willis Group Holdings plc is a listed UK-based company and provider of insurance brokerage, reinsurance and risk management consulting services.

Wendel SA, the listed France-based private equity firm, has acquired AlliedBarton Security Holdings LLC, the US-based security personnel provider, alongside the company’s management team.

Arnoldo Mondadori Editore SpA, the Italy-based company engaged in publishing books and magazines in Europe, has agreed to acquire RCS Libri SpA, an Italy-based company engaged in publishing books, from RCS Media Group SpA. The transaction is estimated to be valued at a minimum of €120m.