Support Services sector comment – August 2011

Dato

Whilst the UK has been waiting for August sunshine it has at least been a hot summer for the Testing, Inspection, and Certification (TIC) market.

The TIC sector which has seen significant M&A activity in the last 12 months has continued its trend toward market consolidation with a number of acquisitions announced in the last few weeks.

We recently reported that Clearwater’s Support Services team advised the shareholders of Alter Technology Group (‘ATG’) on the disposal of its three trading subsidiaries to TUV Nord International GmBH (‘TUV’). The other German giant in the TIC sector, TUV SUD, has recently acquired Wallace Whittle Limited in the UK, a provider of building services engineering and sustainability consultancy, with 135 qualified employees. The Wallace Whittle acquisition was a further example of leading players in the TIC market moving up the value chain to strengthen their consultancy services and technical know-how in key strategic markets such as sustainability. August also saw the leading UK-based TIC group, Intertek Group Plc, acquire Recherche, Developpement & Consulting SA,(RDC) in Belgium as well as Food Analytical Laboratories Limited (FAL) and the UK Fuel and Lubricants Testing Business of QinetiQ Group Plc,

We expect the consolidation in TIC to continue which we will be talking about further in Clearwater’s TIC Market Review which will be available imminently so watch this space.

In other Support Services markets the summer has also been a busy period for deal completions. Whilst the debate continues about whether the Outsourcing market will win or lose as a result of public expenditure cuts Capita Group Plc continues to show a strong appetite for acquisitions in financial outsourcing by acquiring Northgate Arinso UK, a provider of HR and payroll solutions to the public and private sector for £27.5m, and by acquiring AIB International Financial Services Limited (AIBIFS), an Irish provider of outsourced financial and corporate solutions for £29m. The general mood from the Capita camp leads us to expect further acquisitions in the future.

Deals

TUV SUD NEL Ltd acquired Wallace Whittle Limited, the UK based provider of building services engineering and sustainability consultancy with 135 qualified employees for a minimum consideration of £10m. TUV SUD NEL is subsidiary of TUV SUD AG, the German based provider of technical services in consultancy, inspections, certification and training. This acquisition will enable TUV SUD NEL to expand geographically, and grow its services in sustainability and energy efficiency.

Capita Group Plc acquired Northgate Arinso UK Ltd, a provider of HR and payroll solutions to small and medium sized enterprises and public sector bodies for £27.5m on a cash free, debt free basis. Post acquisition Northgate Arinso will be integrated within Capita Hartshead Limited, the Capita subsidiary engaged in providing pensions management services.

Teaching Personnel Ltd, a provider of teachers, teaching assistants and nurses to schools, and a portfolio company of Graphite Capital Management LLP, has acquired Protocol Education ltd, the UK provider of teachers, teaching assistants and nurses to schools, previously owned by Bridgepoint Capital.

Innovative Output Solutions Ltd (IOS), an UK provider of printing and mailing services and a subsidiary of DST Systems Inc. an USA listed corporation, has acquired Lateral Group Ltd, a provider of marketing communications management services in the UK for an undisclosed consideration. With this acquisition, IOS expects to provide other solutions such as data insight and online marketing to the existing client base

Mears Group Plc, a provider of social housing repairs and maintenance across the UK has acquired the supportive care division of Choices Community Care Services Ltd, the UK based provider of services to individuals with learning disabilities, for a cash consideration of £7.4m. The employees of Choices Community Care Services will be integrated into the care division of Mears Group Plc.

Intertek Group Plc, the UK listed provider of testing, inspection and certification services of products, commodities and systems, has acquired Recherche, Developpement & Consulting SA (RDC) in Belgium for £5m. R.D.C employs 28 people and provides environmental impact consulting for consumer products. Post acquisition, R.D.C will be incorporated into Intertek’s Consumer Goods division. Intertek Group has also acquired Food Analytical Laboratories Limited (FAL) and the UK Fuel and Lubricants Testing Business of QinetiQ Group Plc, for consideration of £6m and £0.5m respectively.

Adecco SA, the listed Swiss based provider of staffing services and human resources acquired Drake Beam Morin a provider of career management services in the USA from Compass Partners International ltd, an UK private equity firm, for an enterprise value of €149m ($214.07m). This acquisition allows Adecco SA to penetrate the talent development sector globally.

Soletanche Bachy SA, the global French construction group, acquired Roger Bullivant Ltd in the UK for an undisclosed consideration. Roger Bullivant Ltd is a provider of piling and structural building and civil engineering services. This acquisition allows Soletanche Bachy to enter new segments of ground engineering.

Compass Group Plc, the listed UK based food service and support service company, has agreed to acquire Obasan Gýda Insaat Sanayi ve Ticaret Anonim Sirketi, the Turkey based provider of delivered meals to businesses. This acquisition will add to Compass Group’s existing business in Turkey by providing office meals and expanding its customer base.

Siemens AG, the listed German company has agreed to acquire NEM BV and associated NEM Energy Services (NES); NEM BY is a Dutch based provider of designing, engineering and heat recovery steam generators; both companies counted 1,000 employees and had sales of €325m in 2010. This transaction will expand Siemens’ expertise into new segments and provide NEM with access to new markets through the distribution channels of Siemens.

Capita Group Plc, the UK listed provider of business process outsourcing services acquired AIB International Financial Services Ltd (AIBIFS), the Ireland based provider of outsourced financial and corporate solutions, from Allied Irish Banks, p.l.c., for a cash consideration of £29m, on a cash and debt free basis. This acquisition complements Capita’s existing investor and banking services division business.

Securitas AB, the listed Swedish security solutions company has agreed to acquire Cobelguard Security NV in Belgium for an estimated enterprise value of SEK 347m (€38.16m). Cobelguard Security had revenues of € 59m in 2010 and employs approximately 1,600 people. The acquisition will help Securitas to strengthen its position in the retail segment.