Business Services Sector Comment – September 2014

Dato

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It’s that time of year again! August has notoriously always been a slow month for M&A activity as key deal makers jet off to sunny retreats and enjoy some downtime. Despite this, Clearwater International completed five deals this month and the car rental sector also saw the announcement of two significant deals.

The global car rental industry has undergone considerable consolidation over the last decade with mega acquisitions including that of Vanguard Car Rental Group by Enterprise and Hertz’s purchase of Dollar Thrifty Automotive Group for €570m and €1.8b respectively. These transformational deals have helped to shape the industry and contributed to a highly concentrated, ultra competitive market in which players commonly compete on price, vehicle availability, service, rental locations and product innovation.

However, in driving this global consolidation, the “big 3” (Hertz, Avis, Enterprise) – who collectively have a market share in excess of 70% – now face new challenges to accelerate growth, particularly in developed markets. The limited number of sizeable acquisition targets has led to consolidators becoming increasingly interested in medium-sized players that either offer geographic expansion or a strong foothold in market sub-sectors.

A prime example of this emerging trend was Enterprise Holdings Inc’s recent acquisition of Burnt Tree, a transaction in which Clearwater International advised. Burnt Tree, a specialist commercial vehicle rental business to private companies and public sector organisations, operate a commercial fleet of 17,000 vehicles across the UK from a network of 20 branches. The acquisition will provide substantial expansion of Enterprise’s flexible commercial vehicle division Flex-E-Rent, and help cement the company as a leading player in the UK commercial rental market. For further details of the Burnt Tree deal, please see: http://clearwaterinternational.com/transactions/burnt-tree-sold-to-enterprise-rent-a-car/.

In the wider fleet management and vehicle financing market, Provident Financial plc, a provider of personal credit products to the non-standard lending market and a constituent of the FTSE 250, acquired Duncton Group Limited for £120m. Duncton Group Limited, trading as Moneybarn, is a leading subprime car finance company with revenues of £29.5m and an EBITDA of £18.3m. The acquisition will provide additional revenue streams for Provident and comes at a time when UK car sales are booming but finance for substandard borrowers remains limited.

Clearwater International expects to see further acquisitions in this market, albeit at the smaller end of the scale. In addition, leading players will continue to implement aggressive growth strategies in order to conquer emerging markets such as India and China.

 

Notable Business Services Deals

In a deal managed by Clearwater International, Ocean Outdoor UK Ltd, a UK-based provider of outdoor advertising, has acquired Signature Outdoor Ltd, which provides outdoor media services.

Kirshenbaum Bond Senecal + Partners, a marketing and advertising company, has acquired a 75% stake in Albion Brand Communication Ltd, a UK-based company engaged in providing business, brand, communications and digital strategy and research, direct and viral marketing and web design services.

Endless LLP, a UK-based private equity house, has acquired Office2Office plc, a UK-based business suppliers, managed services and integrated supply chain group. The deal was valued at £40m and had an EV/EBITDA multiple of 6.1x.

LDC, a UK-based mid-market private equity firm, has acquired Clifford Thames Group Ltd, a UK-based company that produces aftermarket data for the automotive industry.

RCapital Partners LLP, a lower-mid market UK-based private equity provider, has taken a majority shareholding in Drum Cussac Ltd, a business risk consultancy enabling businesses, organisations and institutions to operate in emerging and complex markets.

Fairpoint Group plc, a UK-based financial advisor, has acquired Debt Line Topco Ltd, a UK-based debt solutions provider specialising in the provision of debt management plans (DMPs), with in excess of 9,000 plans under management.

RPS Group plc, a UK-based provider of environmental consultancy services, has acquired CgMs Ltd, a UK-based company providing planning and development services to property development industries. The deal value was £13m which represents a premium EV/EBITDA multiple of 9.3x.

Maritime Transport Ltd, a UK-based company which provides road based container transportation services to shipping lines, freight forwarders, and logistics companies, has acquired Roadways Container Logistics Ltd, a UK-based company which provides multimodal transportation and container transport and handling services.

Teacher’s Private Capital, a Canada-based private equity, has acquired a 35% stake in Lowell Group Ltd, a UK-based company engaged in providing debt recovery, data analytics and customer insight services for £333m.

Westbury Street Holdings Ltd, a UK-based provider of catering and hospitality services, has acquired Searcy Tansley & Co Ltd, a UK-based provider of catering and hospitality services.

Renew Holdings plc, the listed multidisciplinary engineering services company, has acquired Forefront Group Ltd, a UK-based company provides engineering services in a £15m deal. The deal represents an exit for Harwood Capital LLP.

Capita plc, a UK-based business process outsourcer, has acquired Monarch Education Holdings Ltd, a UK-based company engaged in providing temporary and permanent recruitment services to the education sector in a £15m deal.  Capita also acquired SouthWestern Business Process Services Ltd, an Irish company providing front and back-office processing services to the public and the private sectors in a £28m deal.

NES Global Talent, a talent management company, has acquired RC Consultants AS, a Norway-based provider of consultancy services to the oil and gas industry.

Ameresco Inc., an energy services company, has acquired Energyexcel LLP, UK-based energy services company that provides energy consultancy and energy project management services for £10m.

BDO LLP, an accountancy practice, has acquired MorganFranklin Ltd, a business consultancy.

JP Morgan has increased their stake in Gamesa Corporacion Tecnologica SA to 3%, following a further investment of £4m.