It is not only the sector’s diverse and sizeable client base that is placing significant demands on HVAC and other associated ‘Hard FM’ focused companies, there are also a range of strategic and financial buyers, including Private Equity firms, that are very keen on acquiring in the sector.

The deal team at EvolutionCBS can point to its own experience of strong demand in the HVAC Sector, when it led the sale of Synecore Limited to H.I.G. Capital (“H.I.G.”), a leading global alternative asset investment firm with £44 billion of equity capital under management, (the terms of the deal were not released).

With a strong pedigree in their sector, Synecore Limited is a leading provider of specialist Mechanical and Electrical servicing and maintenance in the South-East of England, with expertise in HVAC, Refrigeration, Electrical Design and Installation, Air Conditioning, Air purifiers, Refrigeration and Cold Rooms, combined with a full suite of services and maintenance works.

Steve Barry, Senior Client Director at EvolutionCBS, who led the sale, comments on the demand for ‘Hard FM’ and HVAC companies:

“There is strong market demand for acquisitions in the ‘Hard FM’ and HVAC sectors, driven by various factors, including the need to optimise energy efficiency and the increasing integration of the Internet of Things (IoT) technology. Our team focused on managing the entire sale process, facilitating negotiations and latterly due diligence in a competitive process where there was notably strong interest in the opportunity right from the start.”

EvolutionCBS is engaging regularly with international acquirers actively seeking acquisitions in the UK, including those seeking companies offering HVAC, ‘Hard’ and ‘Soft’ Facilities Management and related technical services.

In one example, our Deal Team engaged with a multinational organisation, headquartered in Western Europe, with revenues in excess of £10bn. This acquirer is actively seeking UK acquisition targets, has significant cash on their Balance Sheet in excess of £2bn and is in close contact with the EvolutionCBS team. Crucially, this organisation is very interested in HVAC and Facilities Management companies in the UK, to support their strategic objectives in the UK and Europe.

An analysis of 29 company sale transactions from the start of the decade involving HVAC and facilities management companies, has revealed a diverse range of acquirers. Both Private Equity firms and very large Property Services and Facilities Management organisations are clearly shown to be active in the sector.

North American acquirers also feature in British deals, with both USA and Canada-based organisations having completed transactions, purchasing companies active in critical building services, such as plumbing, heating, air-conditioning, refrigeration, mechanical and electrical maintenance, and energy systems services.

One headline-grabbing deal, the 2021 acquisition of Pimlico Plumbers, Central London’s leading independent maintenance company, by USA-based Neighborly, Inc. the world’s largest franchisor of home service brands, highlights both the demand in the space and the attractiveness of Britain for overseas investors.

Mike Bidwell, President and CEO of Neighborly, commented on the transaction:

“We are thrilled to be growing our global footprint with the addition of Pimlico as the next subsidiary brand to join our global family of home service professionals. We are excited for the growth to come for both Pimlico and Neighborly as a result of this acquisition.”

It’s worth noting that the UK market remains attractive to multinationals and financial buyers alike, despite economic headwinds in the form of higher inflation and the impact of the Russia-Ukraine war. This strong demand for acquisitions from diverse types of acquirers, could mean the time could be right for HVAC and FM company owners, who want to explore a sale to test the market.

As a long-established premium provider of business sale advisory services to UK businesses, EvolutionCBS offers business owners a complimentary and confidential discussion on how their specific objectives could be met and provides pragmatic, practical advice on how to begin preparing both themselves and their businesses for future sale or investment. 

EvolutionCBS works with owners of UK businesses in any sector, finding buyers from around the world through highly targeted research and supporting clients with dedicated Director-led teams, at every stage of their journey to a successful sale or investment. 

If you are an owner or shareholder of a business and would like a no-obligation consultation on the sale of all or part of your business, please email: info@evolutioncbs.co.uk or contact us on Tel: 0118 959 8224.

As in life, there is often an imbalance between emotional and objective responses. In the context of a business sale transaction this is pertinent, particularly during the ‘negotiation’ and ‘due diligence’ stages of a transaction.

Selling a business is a highly emotive process, particularly as, unsurprisingly, a vendor’s emotions are easily stirred if their business is criticised, or their business decisions are questioned.

On the other hand, acquirers are usually ‘serial offenders’ – highly experienced negotiators who have repeatedly purchased businesses and are therefore well-versed in the art of objectivity whereas, for most business owners, this is a ‘one-off’ experience fraught with demands for decision to be made and critical information provided – and all against a backdrop of pressure for agreements to be reached on subjects with which they might have limited familiarity or personal experience.

Objectivity in these situations is important because it doesn’t use personal motivation or reasoning to support a decision, but instead uses hard evidence and deploys factual reasoning. These decisions are therefore not made based on the influence of emotion, prejudice, or bias.

By taking a more objective approach when viewing a situation, there is more clarity, factual analysis, and usually more scope for reasoning – all of which can work together and lead to more effective problem solving.

This is one of the most important services an M&A adviser can bring to a transaction, and it starts from the point of engagement – from the research and marketing of a client’s business with Information Memoranda that provide unbiased evidence of a business. Such evidence can show trend patterns, business features, and evidential plans for future growth. All of this is collated and marketed by an impartial team who are dedicated to ensuring the best outcome for a client’s business.

By being objective, an M&A adviser can provide an unbiased opinion and a balanced assessment of the situation, redressing the balance between emotional and objective stances and thereby facilitating a more objective view of issues being raised.

To provide an example, consider this scenario. A transaction is in due diligence; both parties and their representatives have been involved in several stages and have spent many weeks populating data rooms with questions and answers.

This is a particularly dangerous stage of any transaction where emotions run high and both parties seem to be becoming increasingly tired of the process – something we often refer to as ‘deal fatigue’.

Despite both parties being committed to completing the deal, at this stage it can be easy for either party to feel that they have “had enough” – sometimes over the most trivial issue.

Keeping the deal alive is, arguably, where an experienced adviser delivers the most value. After all, a failed deal is bad for all parties!

In these circumstances, the most ‘sage advice’ a seasoned M&A adviser can give you is “to be calm” and “try to put yourself in the other person’s chair” – in an attempt to at least try and understand the situation from the other party’s perspective.

By cooling the situation down and providing an objective, perspective based on experience and relevant facts, it is possible to encourage both parties to reflect and work to finding an acceptable resolution.

Objectivity allows business owners, acquirers, and their advisers, opportunity to focus on the potential transaction as a development opportunity not only for the buyer but also for the business being sold.

To find out more about what’s involved in selling a business and how to begin your preparations, please join us for a free Business Owners Masterclass on 5^th October aboard HMS Belfast in London.

As a long-established premium provider of business sale advisory services to UK businesses, EvolutionCBS offers business owners a complimentary and confidential discussion on how their specific objectives could be met and provides pragmatic, practical advice on how to begin preparing both themselves and their businesses for future sale or investment. 

EvolutionCBS works with owners of UK businesses in any sector, finding buyers from around the world through highly targeted research and supporting clients with dedicated Director-led teams, at every stage of their journey to a successful sale or investment. 

If you are an owner or shareholder of a business and would like a no-obligation consultation on the sale of all or part of your business, please email: info@evolutioncbs.co.uk or contact us on Tel: 0118 959 8224.

If you speak to any sell-side advisor/consultant working on deals involving companies sold in the £5m to £50m range, they will not only confirm the above, but anecdotally point to all the elements that undoubtedly sway an acquirer’s decision on value – something we refer to as the ‘Return on Investment (ROI) Puzzle’.

So, what is the ‘ROI Puzzle’ you ask? It is the net effect of a variety of elements that, when present in a company sale, can and will motivate an acquirer to not only submit an offer for your business, but will undoubtedly also significantly increase the overall valuation.

One piece of the puzzle includes (but is not limited to) those elements directly related to the financial performance of the business. For example, this can include adjustments to the Operating Profit (or EBIT), commonly known as Add-Backs, which can result in an increased deal valuation by demonstrating the future profitability of the business without the departing shareholders’ costs.

High value contracts can be another attractive piece of the puzzle. These contracts confirm to an acquirer that there is an underlying robustness to the business. Often, high value contracts feature as a small element of an SME’s turnover (perhaps 20%), however it is very often the security of having documented, customer commitments in the form of a contract that reassures an acquirer and boosts valuation.

Additionally, if the contracts result in a significant element of Annual Recurring Revenue (ARR) within the turnover mix, this can be the ultimate driver for delivering a significant ROI to an acquirer, resulting again in enhanced valuations and keener offers in the face of other competitive bids.

A low exposure to Customer Concentration is another element that can significantly boost deal valuations and buyer ROI, particularly if opportunities exist for the acquirer to focus on converting the existing customer base into higher value clients, through cross-selling or up-selling opportunities.

Being able to evidence the loyalty and commitment of the workforce can also be very persuasive in driving valuation, especially as much of the ROI sought by the acquirer in year one post-completion will be delivered by the existing team. Measures of employee absenteeism and productivity, the presence of expertise in sought after domains, such as engineering or software development, and a capable and experienced management team all will contribute significantly to the ‘ROI Puzzle’ and enhanced valuations.

Lastly, if the company is too heavily reliant on the departing owners this can be off-putting for a potential acquirer, particularly if all the customer relationships sit with those shareholders looking to exit in the short term. Nothing threatens the promise of ROI more than an individual holding all the customer relationships and then planning to leave three months after the sale.

Ultimately, the ‘ROI Puzzle’ is unique to each business and company owners must take advice from reputable sell-side consultants, with a solid track record of deals, a deep understanding of how to create a market around the sale and knowledge of how best to present a complete and positive picture of the business to the marketplace.

As a long-established premium provider of business sale advisory services to UK businesses, EvolutionCBS offers business owners a complimentary and confidential discussion on how their specific objectives could be met and provides pragmatic, practical advice on how to begin preparing both themselves and their businesses for future sale or investment. 

EvolutionCBS works with owners of UK businesses in any sector, finding buyers from around the world through highly targeted research and supporting clients with dedicated Director-led teams, at every stage of their journey to a successful sale or investment. 

If you are an owner or shareholder of a business and would like a no-obligation consultation on the sale of all or part of your business, please email: info@evolutioncbs.co.uk or contact us on Tel: 0118 959 8224.

Now, two years later the success of that investment has been realised. Whilst there has been success throughout – with a TV series, lucrative sponsorships, and a playable spot in a long-running video game franchise, for those following the investment there has been an even greater success; not only for the acquirers but also for those they promised to do it for. After all – it is a Hollywood story – of two actors who become owners of a football club and together promote it to the English Football League after 15 years in the lower divisions.

Wrexham AFC is undoubtedly a success story unlike any other in the M&A market.

It could be argued that for Wrexham AFC, its supporters pitch side, and further afield, that the success is actually in its promotion. The celebration of the owners, sharing in their club’s pride and happiness is the image of success. Perhaps that is subjective though.

For acquirers and business owners alike, success is subjective, individual, and personal. The motivations of all parties involved are different and, consequently, each party’s idea of a ‘successful transaction’ will also be subjective. However, all parties involved will want there to be synergy. For there to be a truly successful transaction for both parties, their motivations, corporate culture and other factors will need to be aligned.

A truly successful transaction will pave the way for a positive transition of a business to new owners and a smooth integration that delivers long-term benefits to the combined businesses.  One of our previous blogs has touched on this in discussing how to avoid a post-acquisition culture clash. Find our more here.

Successful businesses value their staff, brand, reputation and customer loyalty. It can, therefore, be reassuring if an acquirer shares those values and agrees they will become one indicator of a successful sale. Another such indicator may be that the team within the business is retained; this is frequently a concern for business owners considering a sale.

From the outset however there needs to be a personalised approach to the sale of a business. In this approach there is discussion between the business owners and their advisers on the best possible outcome for a successful acquisition. For EvolutionCBS our own values of integrity and uncompromising standards have delivered exceptional results for every Client; every transaction the team works on will be different – and so will our approach.

Success is subjective – and the definition of a successful transaction will be different for each business – but it is still achievable. Our tailor-made approach recognises this but also brings a degree of objectivity into the discussions, which is based on more than 12 years of successful dealmaking.

EvolutionCBS prioritises this with a low volume, high touch approach to deliver a truly exceptional level of service. Service that ensures the success of a sale is the best outcome for you and your company.

Several of our Clients have expresses their views on what they considered to be successful outcomes here. If you would like confidential advice about selling all or part of your business, please call us on 0118 959 8224 or email info@evolutioncbs.co.uk

As a long-established premium provider of business sale advisory services to UK businesses, EvolutionCBS offers business owners a complimentary and confidential discussion on how their specific objectives could be met and provide pragmatic, practical advice on how to begin preparing both themselves and their businesses for future sale or investment.

EvolutionCBS works with owners of UK businesses in any sector, finding buyers from around the world through highly targeted research and supporting clients with dedicated Director-led teams, at every stage of their journey to a successful sale or investment. 

If you are an owner or shareholder of a business and would like a no-obligation consultation on the sale of all or part of your business, please email: info@evolutioncbs.co.uk or contact us on Tel: 0118 959 8224.

Here at EvolutionCBS, our highly experienced Directors have both ‘the scars’ and first-hand experience of seeing how a failure to recognise and respect these cultural differences can irreparably damage the value and potential in an otherwise hugely attractive corporate acquisition or investment.

More broadly, a classic and more public example is the £10bn acquisition of Lucent Technologies by Alcatel SA in 2006, which ultimately saw the two executives that led the deal quit the company. The integration was plagued by issues, including the appointment of a CEO who could not speak the local language, and a host of other challenges due to the attempt to instil an American acquirer’s corporate culture within a French/European business setting.

Clearly, getting the cultural fit right between both businesses can lead not only to a successful post-acquisition integration, but also to the longer-term achievement of strategic goals and objectives, such as significantly enhancing the financial performance across the combined operations.

For company owners choosing to sell, getting a solid understanding of the culture of the acquirer and what that will mean for your team is paramount. This extends not only to understanding management practices, but across the organisation, its workforce, and ultimately to how customer relationships are managed.

This was certainly evident in the 2022 sale of Sonnox Limited, the leading designer of innovative and high-quality audio processing Plug-Ins for professional and amateur audio engineers, to Focusrite plc (AIM: TUNE), the global music and audio products group supplying hardware and software used by professional and amateur musicians and the entertainment industry.

This deal, successfully completed by EvolutionCBS in December 2022, is a good example of where the leadership within both businesses had a clear understanding of not only the strategic gains from the synergies on offer (in this case the adoption of new technologies and access to scale, industry expertise and range of premium brands,) but also how the culture within both businesses could be integrated.

This meant early on in the transaction the leadership within Focusrite engaged with the key management within the Sonnox business, ensuring there was good communication and a mutual understanding of what the deal sought to achieve.

Tim Carroll, Chief Executive Officer of Focusrite commented: “This is our first acquisition in the audio software market, and it is an absolute pleasure to welcome Rod and his entire team to the Focusrite Group. Sonnox’s products are globally recognised as ‘best in class’, making them a natural fit in our stable, and we are all excited about the opportunities and possibilities that lie ahead with the collective expertise of our combined sales and R&D teams.”

For sellers another key piece of advice is simply to ‘follow your gut’ – if something doesn’t feel right about the cultural fit between both organisations then choose to look at the wider market and insist your adviser approaches companies (in the UK and overseas) that have both the required synergies and a culture that is likely to benefit your staff and customers.

This means in the preparation for sale you need to work out who the key ‘players’ are in a given market and ensuring your adviser works collaboratively with you to identify a well-researched group of potential acquirers, who you can approach discreetly and with complete confidentiality. To quote one EvolutionCBS client, “why would I sell to a corporation where the word on the street says they are upsetting and losing customers at a rate of knots?” The significantly different approaches to customer care would be an instant deal breaker.

During a PWC roundtable attended by representatives from Silicon Valley’s most innovative companies, 50% of participants cited a clash of corporate culture as one of the most common change management pain points that must be overcome to achieve a successful merger integration.

Post-deal one aspect of this pain for sellers is how to communicate the change of ownership / transition to staff. Whilst engaging with one or two of your key management is crucial to support the Due Diligence phase, engaging the wider workforce post-completion will help prepare the way for the cultural shift.

Your business’ approach to HR and ‘people matters’ will play a role in this area and help to reassure any concerned members of the workforce and for EvolutionCBS clients, guidance is given as to how best to communicate/position the sale or investment positively, so that staff can see the potential benefits that fresh investment and new leadership will bring to the business.

For sellers, preserving what’s best in the business is paramount to its future success, as well as understanding that things will inevitably change under new ownership. One top tip is to consider utilising a formal integration plan, rather than simply making a PR announcement and then hoping for the best.

We would typically expect to see evidence there will be a desire to understand the cultural challenges on both sides of the table – and to see tangible proof that the preferred acquirer/investor will take proactive steps to ensure a successful outcome. This will almost inevitably involve bringing key management on board at the appropriate time in the process and ensuring that any integration plans are effectively communicated to the workforce. In the majority of acquisitions, acquirers will give serious thought to how they anticipate the integration will take place and should work collaboratively with the seller to ensure they can successfully bring those plans to life.

A key aspect of the post-sale phase will be adhering to TUPE transfer obligations – the Transfer of Undertakings (Protection of Employment) regulations, which apply when an organisation, or part of it, is transferred from one employer to another.

According to gov.uk guidelines, TUPE transfer processes can involve the following:

• The old and new employers identify who is affected by the transfer.
• The old and new employers inform, and in some cases consult, employees who are affected by the transfer.
• The old employer provides the new employer with information about the employees who are transferring, for example their age and identity.
• The employees who are transferring transfer to the new employer along with their employment contracts and length of service.

By pursuing a deep understanding of the cultural challenges, engaging early on with key management, and communicating effectively to the workforce, both sellers and acquirers alike can ultimately capitalise on the value inherent in the acquisition and/or investment and ensure the delivery of longer-term success, growth, and profitability.

As a long-established premium provider of business sale advisory services to UK businesses, EvolutionCBS offers business owners a complimentary and confidential discussion on how their specific objectives could be met and provide pragmatic, practical advice on how to begin preparing both themselves and their businesses for future sale or investment.

EvolutionCBS works with owners of UK businesses in any sector, finding buyers from around the world through highly targeted research and supporting clients with dedicated Director-led teams, at every stage of their journey to a successful sale or investment. 

If you are an owner or shareholder of a business and would like a no-obligation consultation on the sale of all or part of your business, please email: info@evolutioncbs.co.uk or contact us on Tel: 0118 959 8224.

Private Equity (PE) buyers have been around a long time – responsible for some of the largest, headline-grabbing transactions in M&A. However, for the mid-market and SME private business owner, PE acquirers have had a mixed reputation.

Historically, PE firms weren’t seen as a viable acquirer by many exiting shareholders who were put off by negative reports about PE deals in the press and horror stories from fellow business owners about poor deal structures, low valuations, massive debt and post-acquisition issues.

M&A advisors have also had mixed experiences with PE in the past. It was often the case that the return on investment model applied by PE meant lower valuations, complex deal structures, and unfavourable terms for clients.

All this resulted in PE struggling to compete against trade.

A silent, but dramatic, change…

But over the last decade – and especially in the last 5 years – something has drastically changed.

PE acquirers are becoming increasingly prevalent in total M&A. The latest figures include some of the private equity industry’s biggest deals since the financial crisis and PE buyers accounted for nearly 10% of all acquirers in global M&A in 2017 – the highest level recorded.

In the mid-market and SME sphere, there has been a seismic shift that demonstrates an overhaul to the PE investment approach. We now see PE outbidding trade acquirers on a regular basis and Private Equity acquirers are now an attractive option for SME business owners.

In transactions involving UK targets in deals up to £50million, the percentage of outright private equity acquirers has increased – now accounting for 14.65% of all acquirers in 2017. This is a 10.5% increase on 2015 and a massive 63% increase over 2009 PE acquirer levels.

EvolutionCBS has seen a marked increase in the interest from PE. In the last 18 months, there has been an offer from a private equity acquirer in 83% of our sale mandates.

In our last 6 successful completions there werea total of 53 interested parties (a mix of trade and PE acquirers). In these last 6 completions, 4 clients to sell to a PE buyer.

“In these deals, EvolutionCBS has delivered a strong range of choice of trade and financial buyers to clients and 66.66% of our clients chose PE over trade. This means PE are not only competing with, or outbidding, trade on value but the deal structures, growth story and future opportunities are increasingly more attractive to our clients than a trade acquirer. This is a seismic shift from 10 years ago.” Steve Barry, Client Director, EvolutionCBS

In February 2018, EvolutionCBS led the sale of M J Wilson to specialist PE firm Caingorm Capital Partners. Cairngorm saw the business as an ideal platform for growth in the MRO space and outbid high interest from a range of acquirers; including strategic buyers from the USA looking to enter the UK market. PE outbidding motivated strategic trade would have been very rare 10 years ago.

“The issue facing private equity is the availability of quality targets rather than access to funds. As a result, today PE firms are paying full price for quality assets which is giving sellers even more choice when they come to sell.” Head of Research, EvolutionCBS

So, why has PE changed?

The change in PE approach directly reflects the current market environment. There is significant competition in the sector; the number of UK PE firms continues to rise and they face fierce competition for assets among themselves, from strategic corporate buyers and institutional investors.

At the same time money continues to flood into the sector. Cheap debt and highly favourable borrowing terms means many PE firms are raising record levels from investors. With unspent capital and huge funds at their disposal, there is increased pressure from investors for private equity firms to put this money to work.

With a limited supply of quality opportunities and an abundance of funds (and pressure to use them), PE firms have realised that they need to compete and differentiate themselves to secure targets.

Reputation plays a vital role in PE dealflow. PE appears to have realised that their reputation needs to be excellent not only with potential targets and their advisors, but with investors too.

This perfect storm is fuelling the increased activity and competitiveness of PE acquirers.

So, why is PE now so attractive to mid-market and SME sellers?

In short, price and deal options are the key factors.

PE no longer lags trade in terms of valuation. EvolutionsCBS are seeing this across the board in our transactions. PE valuations for clients are invariably on par with, or even better than, trade.

There is also a wealth of PE houses with different focuses, specialisms and values. This means that EvolutionCBS can not only bring a variety of trade buyers to the table, but there is now a wealth of PE options for clients too.

There is now more choice for clients which ensures they can be certain they’ve found the right PE partner for them. Clients can now look beyond the financial numbers and be certain there is a match in terms of ethics, working ethos, personalities and vision for the future.

PE buyers no longer simply offer investment. They bring a wealth of experience, expertise, relationships, and skills that complement shareholders’ skillsets. PE now brings investment and a commitment to add real value.

The myriad of deal structures PE can put together, along with the expertise, relationships and growth opportunities they bring to the table can offer an exit route that trade can’t match. This, coupled with strong valuations, means EvolutionCBS now sees many more clients deciding to cash out a lump sum now, but retain a stake and join the ride under PE ownership – excited about the future.

Have you considered the current operational and financial health of your business?

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