Acceleration through acquisitions: M&A during lockdown
Thoughtful acquisitions can expand geographic and product reach. The current backdrop has revealed fresh opportunities which may be more attainable now – but the right mix of funding and transaction experience are crucial to ensuring success.
Growing a business is hard work. A lot of graft, a little luck, and tremendous perseverance is needed to turn an idea into a successful enterprise. Adding a pandemic into the mix caused most if not all businesses to pause and then adapt.
“Adapting has helped many companies to survive, and we’ve seen quite a number going on to thrive,” says Mark Williams, Partner at Inflexion Private Equity. He can talk to the experience of a 50-strong portfolio, which range in size, sector and geographic reach. “Initially we saw an acute focus on retaining existing revenues across most of our portfolio. Goals became shorter term and KPIs were reviewed very regularly in the spring. This shift saw a renewed focus on the human side of things, with Inflexion harnessing the collective wisdom of its sizeable portfolio to share best practice for looking after the wellbeing of staff."
Spring into action
A key growth lever for Inflexion’s portfolio is M&A, owing to the transformational impact it can have on a business. “Spring 2020 saw some of the portfolio pause but not stop with these plans: we already had a number of discussions underway with management teams, and 18 have signed this year,” recalls Mark. Bollington Wilson, one of the UK’s leading independent insurance brokers created by an Inflexion-backed merger in 2017, was among the acquirers, and by August announced Watson Laurie as its fourth acquisition of the year to expand its regional presence in the North West of England.
Two of the Q2 acquisitions were led by Alcumus, a provider of risk management solutions which had two earlier acquisitions and over four years of Inflexion support under its belt prior to the pandemic. “There is a strong level of mutual trust between us and Inflexion. Just nine weeks after we first partnered, they supported our purchase of Santia, a transformational transaction for us. That experience showed us how valuable having a financial backer with experience in this delicate matter can be,” says Tim Jackson, CFO of Alcumus.
Trust and experience are always important, but never more so than now when it comes to getting deals across the line remotely. Last year Alcumus expanded into North America with the acquisition of eCompliance, and set its sights on ContractorCheck in Canada shortly thereafter. Discussions with management commenced in December 2019, with open and honest conversations building a relationship based on trust – which would become crucially important when coronavirus catalysed remote working just a few months later. Alcumus also approached UK-based Banyard Solutions in February, by which point coronavirus was already in Europe, and so those negotiations were conducted almost entirely remotely. With the learnings of two prior acquisitions to draw on as well as the ongoing support of Inflexion, terms were signed in March and both deals closed in June.
Take your time
While conducting negotiations and due diligence remotely can be efficient owing to reduced travel downtime, there may be merit in taking the time to gain comfort around a changing backdrop. Alcumus, for example, could have closed on its two latest acquisitions sooner than three months after signing terms, but chose to go more slowly. “We wanted to take time to ensure they’d emerge from this period just as strong, checking in with management very regularly. We were open and up-front with the vendors, saying if your business is negatively impacted, it will affect our price,” Tim explains.
Bedding down acquisitions is a vital part of M&A, one which takes time to get right. In fact, many of the 260+ acquisitions Inflexion has supported for its portfolio have been undertaken in the first year of partnership, ensuring there is ample time to integrate the businesses effectively together.
Not all acquisitions are transformational on their own; others can be part of a wider, measured approach to growth – which may work very well in today’s evolving backdrop. UK veterinary chain Medivet has made ten acquisitions in 2020, having received minority funding from Inflexion in December 2016 to support their ambitious acquisitive growth plans. Mark sits on the company’s board and says, “ capital and experience is key to coming out of this year stronger,” Mark says.
Their journey illustrates the powerful effect a large number of smaller acquisitions can have on a business – in under four years the firm have doubled the number of vets it operates throughout the UK to over 300 today.
While 2020 is unlikely to be remembered as a year of ‘business as usual’, it’s clear that a lot of business has still taken place. The Inflexion portfolio has collectively announced 18 add-on acquisitions in five different countries so far this year. “A number of these came from conversations which began prior to lockdown, but many came about as management teams carefully considered their plans back to growth and how they might look. Some saw fresh opportunities arise, and many more are in discussions with businesses which may not have been within reach or even on their radar prior to this year. Having the ability to pursue those with sufficient
Acquisitions and mergers: Radius creates new business through M&A
Management at Radius Payment Solutions are very familiar with acquisitive growth, having undertaken half a dozen acquisitions in a year – including seven in a seven-week period. The firm’s growth has been supported by Inflexion, which provided minority capital in early 2018, and it has catapulted Radius into Europe’s third-largest telematics provider in Europe.
The team spent the first half of 2020 integrating three of its acquisitions to launch Radius Connect, a technology, mobile and fixed line telecommunications provider which will utilise its data and networking to work with businesses on how they manage their operations. Radius is now focused on further acquisitions and during the summer acquired two further businesses.