Support Services sector mergers and acquisitions comment – August 2008

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Welcome to the first edition of Clearwater’s Support Services monthly M&A newsletter. With an impressive track record of completing over 80 deals, 13 in the last 18 months alone in the Support Services market and its sub sectors, our sector team has breadth and depth in experience along with strong links within the industry.

In the future we look forward to providing you with a selection of some of the most significant and interesting insights into the sector each month and the deals from across this vast market.

Whilst current conditions across the global economy are certainly challenging, business to business services tend to perform better than most sectors during slow-downs as it encourages businesses to look for ways of reducing costs that very often result in internal services being outsourced to specialist and volume suppliers.

Strategic acquirers are continuing to be active, with only last week Bunzl the UK distributor and Bureau Vertias, the French inspection and testing business both announcing they were on the lookout for acquisitions and G4S, the Anglo-Danish security company, announcing it had about “a dozen” acquisitions lined up, which suggests that activity in the sector is by no means slowing.

Deals completed in the UK

Wood Mackenzie announced it had acquired Brook Hunt, the metals and mining consultancy for an estimated £60m. Wood Mackenzie is owned by private equity firm Candover. Under Candover’s ownership, the group has acquired research and consulting companies Hill & Associates and Barlow Jonker. The acquisition was made due to the cultural and strategic fit.

DCC, the Irish support services group, is to acquire Chevron Limited U.K.’s (CVX) Texaco business for £21.9m. The business, trading under the Texaco brand, distributes transport fuels and heating oils to commercial, industrial, agricultural and domestic customers principally in Southern England and Wales. The acquisition will bring significant further scale to DCC’s oil distribution business in Britain and is consistent with its strategy of growing its presence in this market.

Computershare has agreed to acquire Busy Bees Childcare Vouchers, the UK voucher division of ABC Learning for £90m. ABC Learning is expected to use the proceeds to pay off the outstanding balance on its $1.05 billion debt facility.

Sovereign Capital, through its subsidiary company, Renovo has acquired 1st Saxon-Clenmay Limited a gas and electrical maintenance provider. The acquisition will enable Renovo to provide mechanical, electrical, and fabric maintenance services to social housing landlords in the South of England and Wales. Sovereign is committed to supporting Renovo’s Buy & Build strategy and is keen to acquire further companies in order to expand its geographic reach and to add to its portfolio of services.

Southern Bear plc has acquired Fenhams the central heating systems installation and maintenance company. Based in Newcastle, Fenhams carries out building repairs and maintenance to the private housing and social housing market. Reported deal value was £7.5m. Southern Bear is an AIM listed holding company focused on investments in the support services sector.

Carillion plc has sold a 50% stake in Oxford John Radcliffe Hospital PFI to HSBC Infrastructure Investments Company (HIIC). HIIC is a listed infrastructure investment company for a consideration price of £18m. The project was developed and built by Carillion and has been operational since December 2006 Carillion will continue to provide facilities management services for the project.

Elior, the French catering company has acquired the remaining 49% in Azure Support Services Ltd. Azure, the Edinburgh-based caterer, provides premium catering to a variety of sporting events and stadiums which include Glasgow Rangers FC, Nottingham Forest and Kempton Park. Consideration was not disclosed.

Derivatives Consulting Group Ltd has been acquired by a Massachusetts based global services firm, Sapients. DCG will operate within Sapient’s TRM practice, which provides high-end business consulting. Consideration was not disclosed.

Quinetiq Group plc, has acquired US, Dominon Technology Resources Inc. DTRI, a US based mission focused systems engineering and mission integration company brings new customer relationships from within the US Intelligence Community and will provide Quinteq with a foothold into the North American market. Deal value is estimated to be £83m. The deal is subject to US regulatory approval and is expected to close in early September.

Noonan Support Services, has been acquired in a management buy-out back by Private Equity firm, Alchemy Partners. Noonan is a multi service facilities management company and provides a range of services including contract cleaning, security services, outsourced services and grounds maintenance. Aramark Corp the listed US catering and Facility Management company had also been in talks to acquire the company. The deal is valued at more than £70m.

Serco plc announced the acquisition of SI international Inc, a Nasdaq listed US federal government contractor. SI International is focused on federal IT modernisation, defence transformation, homeland defence and mission-critical outsourcing. This is Serco’s second major North American acquisition in three years and will enhance its scale in the US federal markets. Deal value is estimated at £229m.

QA-IQ is set to acquire Xpertise plc. The UK’s largest IT training provider, QA-IQ has increased its offer to Xpertise plc to £9.6m. Xpertise, a provider of IT training also announced it will not be proceeding with its bid for Parity Training, the IT training division of Parity Group plc.