Assessing the options on the UK acquisition trail
Having taken the plunge relatively recently, Dublin-based Trilogy Technologies first considered selling its managed IT services into the UK from its Irish base. “But we’d seen a number of companies adopt the ‘fly over every week’ kind of approach and we really didn’t think that would work for us,” says CEO Edel Creely.
The company obtained grant support from Enterprise Ireland to research its market access options and took over six months to identify and acquire a target. “Because of the sheer scale of the UK market, there are plenty of companies to choose from,” Creely says. The attributes she was looking for included capability, a good existing customer base and the strength of the executive team. “We worked with a number of brokers and laid out clearly what we were looking for. They offered suitable matches for us to consider, and I would say from our experience, it is much better to work with a broker.”
Trilogy acquired b2Lateral and immediately rebranded it. “For us, the big advantage in buying a UK business was acquiring a customer base and a team with local knowledge and local relationships,” she says. “Even though it’s our near neighbour, there are cultural differences, for sure. That’s why you do need a local sales team on the ground.”
In a similar line of business, Irish company Version 1 has acquired no less than five UK companies, ranging in size from 20 to 100 employees, over the past three years.
A long-established managed services business started in 1996, it has taken a deliberate step up from organic growth to acquisition and now employs over 600 IT professionals in Ireland and the UK. “Our strategy is to buy niche consultancies. For us, it’s about customer and talent acquisition and cross-selling of additional services,” says co-founder and CEO Justin Keatinge.
For Keatinge, the UK was the obvious first port of call. “It’s a big market and you’d want to have a very, very good reason to step over it,” he says. “It is culturally aligned to Ireland, certainly in terms of HR and legal matters, and it’s 10 times the size, which means a lot of opportunity right on our doorstep.”
Keatinge set about identifying acquisition targets himself using his extensive business network of contacts supplemented by desk research. Only recently has Version 1 hired a dedicated M&A manager. “We’re now well known in the market as an acquirer, and companies come to us.”
But patience is also a virtue, he notes. “Our most recent deal was with people I’d first met two years ago. You can have a relationship for several years before the time is right. That can often be because of competing desires within a company. We have offered equity in Version 1, particularly in a situation where one of the selling shareholders is keen to stay and grow value.”
Acquisition for Scale
On the cusp of two first time UK acquisitions, Cork-based Anderco began life in 1976 and has focused on safety since 1993. It now has core competencies in safety products, services, training and workwear, with about 2,000 customers across a wide spectrum of market sectors.
Managing director Alan Bruce says the company had been struggling to achieve the volumes it needed for its lower cost, high volume products and sought to generate them in the larger UK market, working initially with a UK-based customer. “We had a bit of success and the question quickly became whether we should grow organically there or through acquisition. Getting scale by going the organic route can be slower and with a much stronger element of uncertainty. Acquisition can be more expensive, but there’s much greater certainty,” Bruce says.
For Anderco, the acquisition journey started about a year and a half ago, initially with profiling and then shortlisting targets. The company is now actively in talks with two firms, working with M&A advisor Brian Murphy. Bruce highlights that starting with the right corporate finance partner with access to good quality information is a key part of the process. UK suppliers were also a rich source of industry knowledge as were various market reports.
“We recognised that we wanted an acquisition that was the right size for us, something we could cut our teeth on first before moving on to something bigger,” he explains. “We’ve gone through five companies. Two came close but we couldn’t agree on price; we’re very close to contract stage with another two. Any deal has to stack up on value for money, and that can be an education for sellers, too!”
Learn how the Enterprise Ireland Be Prepared grant can be used to identify the opportunities that Brexit presents.