Support Services sector comment – February 2012

Date

Last month Bureau Veritas announced the acquisition of AcmeLabs, a market leader in upstream minerals testing in Canada and Huaxia, a Chinese leader in technical control and supervision in construction.

With these two acquisitions Bureau Veritas acquired a market leading position in the high growth market of minerals testing and entered the Chinese construction industry in anticipation of a surge in demand for inspection and verification services.

Both of these market drivers i.e. growth in demand for minerals and in real estate and infrastructure construction in emerging economies were identified in the Test, Inspection & Certification (TIC) market report recently produced by Clearwater and to be published during March.

In the UK, the TIC report identifies consumer goods, and the environmental sectors as the most attractive demand sectors and testing as the biggest service market. According to the UK Accreditation Service there are 1,471 authorized laboratories in the UK of which only 196 are owned by the public sector representing significant consolidation opportunities.

On a global basis, the report also identified that consumer goods testing, especially food, is in high demand in Africa; that electrical vehicle testing will witness double digit growth in the USA; and that in Eastern Europe more companies are expected to apply for management and product quality certificates to improve export profile and enhance their competiveness in Western Europe.

Clearwater anticipates further consolidation in the UK testing market. Large corporates and Private Equity funds are aggressively targeting the UK market looking for complementary services to existing portfolios or to build new service platforms in markets with strong growth.

Deals

The Capita Group Plc, has acquired Smiths Consulting, the UK based management consultancy specialising in technology enabled business change for total cash consideration of GBP 12m (including earnouts of GBP 2m). Smiths Consulting has a staff of 52 direct employees and is supported by 150 associates. The acquisition will enhance Capita’s existing in-house SAP consultancy capabilities by creating a core hub of expertise and resource. The strong customer base of Smiths Consulting will also be benefited from Capita Group’s scale and scope of service offerings provided by Capita Group.

ReStore Plc, in the UK acquired Harrow Green Ltd in the USA, a provider of removal & IT relocation, storage, records management, office interior design, fit-out and furniture supply services. ReStore will pay a cash consideration of £6.25m and will assume Harrow Green’s debt of £5.6m. Furthermore, ReStore will pay earnouts of £1m in 2015, with earnouts payments dependant on company performance in 2014.

iEnergizer Ltd, the UK business process outsourcing company has acquired Aptara Inc the integrated digital publishing and content technology solutions company. iEnergizer acquired Aptara for $150.1m based on a agreed enterprise value of $144 on a debt-free cash-free basis.The acquisition provides iEnergizer with the opportunity to enhance its service capabilities, increase scale and broaden the offering of services for existing and new customers.

UK Wealth Management Ltd, a portfolio company of the private equity firm Duke Street LLP has acquired Independent Medical Investment Consultants Ltd, a financial advice company for medical and dental companies for an undisclosed amount. UKWM is a financial services group specialising in wealth management and employee benefits. The acquisition is in line with group’s strategy to grow its presence in the dental and medical support market.

CACI Ltd, the USA listed professional services and IT Solutions Company acquired Tomorrow Communications Ltd, a technical services company specialising in network and associated support services for an undisclosed consideration. The acquisition will allow CACI to enhance its current network design and OSS consultancy services.

Bureau Veritas S.A., the France based supplier of conformity assessment and certification services has acquired the Canada-based AcmeLabs, a leading upstream minerals testing company and 70% of HuaXia, the Chinese leader in the supervision and technical control of construction. The acquisitions are part of the Group’s 2015 strategic plan to further densifying its worldwide network and extend it’s service offering in highly attractive market segments. AcmeLabs complements the technical capabilities of Bureau Veritas’ Commodities business, while significantly strengthening its market position in Canada. The HuaXia acquisition enables Bureau Veritas to enter different segments of the Chinese construction market and expands Bureau Veritas’ portfolio of services offered to its current clients in China.