Business Services Sector Comment – August 2014

Date

At a time of healthy forward workload expectations, low interest rates and signs of a return to higher margins, it comes as no surprise that global engineering consultancies are looking to scale up to deliver integrated services for clients. To achieve this, companies that fill service gaps and provide growth into new territories remain attractive acquisition targets to consolidators. In July, two mega-deals were announced that support this on-going trend:

The first deal saw engineering design company AECOM acquire fellow US consultant engineer URS Corporation for €4.5bn including debt. The acquisition will provide substantial expansion in the UK for AECOM, who will become the largest consultant by head count – leapfrogging Atkins, Jacobs and Mott MacDonald. In addition to significant growth in the UK and USA, AECOM also expanded its presence in Spain through the acquisition of Madrid-based ACE International Consultants S.L., a leading consulting firm specialising in economic and social development.

In a demonstration of the fierce competition for prized assets, UK-based design and engineering consultancy Hyder Consulting plc, who last week recommended a takeover bid by listed Dutch engineering firm Arcadis NV, are set to accept a counter-offer from Japan’s Nippon Koei. The €337m bid represents a 44.9% share premium of the share price as at July 30th and an enterprise value to EBITDA multiple of 11.7 times. The deal sends a clear statement about Nippon Koei’s intention to expand into new territories, with the acquisition offering a platform in the UK, Germany and Australia in addition to complementing existing operations in Asia and the Middle East. However, this is far from a done deal with Arcadis NV likely to consider a revised offer and the possibility of a new bidder emerging.

The deals follow a spate of acquisitions in the engineering consultancy market, with US-based Jacobs Engineering Group Inc having acquired employee-owned consultancy Sinclair Knight Merz for €894m in September and British engineering consultancy AMEC having acquired UK-listed rival Foster Wheeler in a €2.5bn takeover in February. To add to this, there is still the question of who will buy Parsons Brinckerhoff, Balfour Beatty’s multinational engineering and design firm and arguably the crippler in the recent merger attempts between Carillion and Balfour Beatty. Second round bidders in the sale process include WSP, WS Atkins and two buyout groups.

At Clearwater International, the consultancy sector is an area we know only too well, having advised on in excess of 8 deals. In our most recent transaction, we advised the shareholders of Finnamore – a leading health and social care consultancy – on the cross-border sale to GE. We also have particularly strong credentials in the engineering consultancy space that include the sale of DGP International Ltd to Scott Wilson plc, the recapitalisation of Projen, and the MBO backed by NVM Private Equity of Foreman Roberts.

 

Deal Highlights

UK

Palamon Capital Partners LP, the UK-based private equity firm, has agreed to acquire Simplify Channel Ltd, the UK-based legal group comprising of law firms Move with Us, DC Law and Chorus Law.

BECAP12 Fund LP, the UK-based fund of listed UK-based private equity firm Better Capital Ltd, has acquired OfficeTeam Group Ltd, the UK-based provider of office products, from Royal Bank of Scotland Group plc for a consideration of €100m.

Succession Advisory Services Ltd, the UK-based wealth management company and a portfolio company of Inflexion Private Equity Partners LLP, has acquired LRH Wealth Management Ltd, the UK-based wealth management firm, in a deal estimated to be worth €3.8m.

Computershare Ltd has signed a definitive agreement to acquire Homeloan Management Ltd from Skipton Building Society. Homeloan Management Ltd (HML) is engaged in providing financial outsourcing and third-party mortgage administration services. The deal is reported to be worth €60m.

Arthur J. Gallagher & Co., the listed US-based provider of insurance brokerage, risk management, third party claims settlement and administration services, has agreed to acquire Employee Benefits Business from Baker Tilly International for an undisclosed consideration.

Singapore Post Ltd has signed a sale and purchase agreement to acquire F.S. Mackenzie Ltd, an Essex-based freight and logistics company engaged in providing sea, air and road freight logistics solutions.

The management team of Allseas Global Logistics Ltd, the UK-based freight forwarding company, has acquired the company in a management buyout transaction.

Incorporate Travel Management Ltd, the UK-based travel management company and a portfolio company of Praetura Capital LLP, has acquired SAT Business Travel Management Ltd, the UK-based independent marine and corporate travel management specialists.

Charles Russell LLP, the UK-based law firm, has agreed to merge with Speechly Bircham LLP, another UK-based law firm, for an undisclosed consideration. The merger will create a new entity, Charles Russell Speechlys, which will be based in London, having 170 partners, a total of 500 lawyers and combined revenues of €170m.

Inflexion Private Equity Partners LLP has acquired a majority stake in PD & MS Energy (Aberdeen) Ltd, the UK-based provider of project management and engineering design services to oil and gas, drilling, production, and marine industries, from Equistone Partners Europe Ltd for a consideration of €73m.

UK-based private equity firm Bridgepoint Capital Ltd has acquired Phlexglobal, a leading provider of document management solutions and other support services to the global clinical research market, from Inflexion Private Equity Partners LLP for a consideration of €53m.

Intera Fund II Ky, the Finland-based fund of Intera Equity Partners Oy, has acquired a majority stake in Rototec Geothermal Energy plc, the UK-based company engaged in providing geothermal energy systems and platforms in Finland and Sweden, for an undisclosed consideration.

Galliford Try plc, the listed UK-based company engaged in construction and house building, has acquired Miller Construction, a UK-based business engaged in house building, property development and construction, from The Miller Group Ltd for an acquisition price of €20.8m.

Capita plc, the listed UK-based provider of support services, has acquired Projen plc (Projen), a UK-based company engaged in providing project management, process engineering, drawing management, training, civil and structural engineering.

KVH Industries Inc has acquired Videotel Marine International Ltd, the UK-based company headquartered in London which is engaged in providing training solutions for the shipping and marine industry. KVH will acquire Videotel for €36m.

Ares Management LLC, the US-based asset management and private equity firm, has agreed to acquire a majority stake in London Square Ltd, the UK-based company engaged in the development of residential real estates, from Graphite Capital Management LLP for a consideration of €138m.

UniGroup Inc, the US-based company engaged in providing global relocation and specialised logistics solutions for residential and corporate customers, has acquired Sterling Relocation Ltd, a UK-based provider of employee relocation services to companies.

DFDS A/S, the listed Denmark-based integrated shipping and logistics company, has acquired Quayside International Ltd (Quayside), a UK-based company engaged in providing temperature-controlled logistics services for fresh and frozen food products.

The management of S. Walsh & Sons Ltd (Walsh), the UK-based construction sub-contractor, has acquired the company in a management buyout transaction for an undisclosed consideration.

Bridgepoint Development Capital has sold The Energy Solutions Group, a UK energy management services provider, to SSE for up to €90m. The consideration equates to a 2.1x return on its original investment.

 

Non-UK

Denmark-based investment company Kirk Kapital A/S has agreed to acquire a 46.5% stake in Allianceplus A/S, the Denmark-based provider of soft FM services, from private equity firm Polaris Management A/S for an undisclosed consideration.

Lindorff Espana SL, the Spain-based company engaged in providing debt collection and management services, is acquiring the debt recovery business of Banco de Sabadell S.A., the Spain-based commercial bank, for a consideration of €162m.

Eugenio Calabuig, a Spain-based private individual and chairman of Aguas de Valencia S.A. – a company engaged in water, sewage and water treatment, has acquired an indirect 30.5% stake of the company from CaixaBank S.A for a consideration of €95m.

Ernst & Young LLP has acquired BIMaven Consulting Lda, a Portugal-based strategic and technological consulting company specialising in business intelligence, Data Management, Corporate Performance Management and Data Analytics.

Qualitas Equity Partners, a Spain-based investment management company, has acquired a minority stake in Jobs and Talent SL, an online virtual recruitment platform.

AECOM Technology Corporation, the listed US-based provider of technical and management support services in transportation, construction, operations, environmental and energy sectors, has acquired ACE International Consultants S.L., the Spain-based consulting firm which provides assistance in economic and social development cooperation, internationalisation and private sector development, for an undisclosed consideration.

Hispania Activos Inmobiliarios SA, the listed Spain-based real estate company primarily investing in residential, office and hotel properties, has acquired a 90% stake in Oncisa S.A., the Spain-based company that develops residential and office property and also engages in real estate management, administration, maintenance, and commercialisation of property, via a capital increase transaction for a consideration of €80.2m.