|Deal completed in:||10 months|
We have an ongoing acquisition brief with a medium sized family business in the bakery and catering equipment sector. The company employs approaching 300 staff the majority of whom are qualified service engineers based around the UK, installing, maintaining and servicing bakery equipment for the major supermarkets. The company’s headquarters are in South West London with a major service presence in Leeds and Scotland.
Our client, the new CEO of the business who had recently taken over from the previous generation becoming the fourth generation to take the reins, had identified the need to transform the business through diversification into new but related markets and significant growth to bring economies of scale, stability and substantially increased value for the family asset and the next generation.
With an annual turnover of £11m in 2012-13, a large portion of this was with one principle client, a supermarket chain who by its nature constantly puts pressure on pricing and contractual obligations. The principle client was also looking to expand its operations in the South East of England, and therefore away from where the majority of our client’s engineers were based.
Therefore the transformation strategy was initially hinged around reducing the reliance on the principle client and developing the engineering resource in the South East. Rather than turning down business from this client, the objective had to be to grow the overall revenue several times over whilst diversifying out of the niche sector of bakery equipment and acquiring more skilled service engineers. The way to achieve this was through acquisition of an equivalent sized business operating in a related sector.
What Hornblower did
The common denominator with the acquisition targets was to have a large team of service engineers and maintenance contracts with blue-chip clients. The need for bakery equipment specialists was secondary. Therefore our research department analysed the general catering equipment market in the South East of England to draw up a list of companies operating in this sector, of a certain size and who’s owners we believed through our experience would be open to a discussion on the sale of their business.
Rather than rely on the “on-market” businesses listed on various business sale websites, our acquisition search process focuses on finding “off-market” businesses which are the best fit for our clients’ strategic objectives, which in turn enables us to negotiate a deal which works well for both sides.
Having established an open dialogue with a number of business owners as a result of our direct approach, we were able to present a short list of companies to our client. After several meetings aimed at identifying the strategic benefits and discovering the type of deal which would work well for both vendor and purchaser, we were able to submit a win-win offer to one of the targets and our client was able to focus on one acquisition which would increase significantly the scale of the company and reduce the reliance on the bakery sector and principle client.
The target company was a general vending and coffee machine maintenance and service company with a turnover of £14m. The company had service contracts with blue-chip company headquarters as well as a complimentary set of high end supermarkets. As a result our client’s company revenue grew to over £25m, they have inherited a team of experienced senior staff and engineers to enhance their existing team and the proportion of revenue generated from the principle client has been vastly reduced. This first acquisition completed in May 2014 and our client is again actively looking for further acquisitions in the catering equipment, industrial refrigeration and air-conditioning sector.
Deal completed: May 2014