UGI expands European energy presence with acquisition of DVEP

08 September 2017 Consultancy.uk

US headquartered energy firm UGI has added DVEP, a fast growing energy services supplier from the Netherlands, to its European portfolio. Around 70 employees transfer to the American outfit.

With revenues of over $8 billion, UGI Corporation is one of the US’s larger energy distributors and marketers. The company, among others, operates natural gas and electric utilities in the US, distributes propane both domestically and internationally and, through subsidiaries, provides energy services and products in France, Belgium and the UK.

The company’s acquisition of DVEP marks UGI’s market entry into the Netherlands, a locale with a total annual energy consumption of over 85 Mtoe (million tonnes of oil equivalent), which makes it Europe’s 5th largest energy market. DVEP markets natural gas and electricity, of which a relatively significant share is produced from renewable sources (mainly wind and solar), primarily to small and medium enterprises in the Netherlands – the firm has a particularly strong track record in the segment for schools and municipalities. In 2016, DVEP sold approximately 5.3 billion cubic feet of natural gas and 2.7 terawatt hours of electricity*.

Commenting on the acquisition, John Walsh, president and chief executive officer of UGI Corporation, said, “We are pleased to close this important acquisition and expand our existing energy marketing business in Europe. DVEP is a high performing company with an impressive track record of growth and provides UGI access to a premier European market as well as a platform for further expansion.”UGU acquires DVEP

The chief executive added that DVEP will further bolster UGI’s service capabilities. One of the core businesses of the Dutch firm is the provision of fee-based services and marketing solutions to other energy marketers in the Netherlands. UGI will leverage this expertise, he said, to ramp up its own foundation for a “fee-based service income” business model. “We’re excited about the potential.”

Roger Perreault, president at UGI, remarked, “DVEP is an important player in the Dutch business-to-business energy market. The company has significant expertise in the European energy market, has realised impressive growth in a short time span and will significantly improve UGI’s capacity to serve its clients in the Netherlands and beyond.”

According to its most recent financial statements, DVEP generates a revenue of around €141 million, with profitability at €4.5 million. Its most recent net profit was €3.3 million, up €900.000 from the previous year.

As part of the deal – financial details of the transaction have not been disclosed – 70 employees of DVEP (all based in Hengelo) will join the American company, which itself employs 13.000 professionals. They will, according to DVEP director Willem Bokhove, be able to benefit from the expertise and international footprint of the firm’s new parent. “UGI is the perfect fit for the next stage of growth for DVEP. This deal opens up an avenue of new opportunities in Europe for our services, products and employees.”

Throughout the sale process, DVEP was advised by the corporate finance arm of Baker Tilly Berk (the Dutch member firm of Baker Tilly) and Solon Advocaten, a local Dutch law firm based in The Hague.

* In comparison, Nuon, one of the largest energy producers in the Netherlands, supplies around 20 terawatt hours of electricity.

×

8 tips for successfully buying or selling a distressed business

18 April 2019 Consultancy.uk

Embarking on the sale of a business is one of the most challenging experiences a management team can undertake. Even serial dealmakers acknowledge that the transaction process can be gruelling, exposing management to a level of scrutiny and challenge through due diligence that can be distinctly uncomfortable.

So, to embark on a sale process when a business is in distress is twice as challenging. While management is urgently trying to keep the business afloat, they are simultaneously required to prepare it for scrutiny by potential acquirers. Tim Wainwright, an experienced Transactions Partner with Eight Advisory, says that this dual requirement means sellers of distressed businesses must focus on presenting their business in a way that supports buyers in identifying value, whilst simultaneously being open about the causes of distress. 

According to Wainwright, sellers of distressed businesses should focus on eight key aspects to ensure they are as well prepared as possible:

  • Cash: In a distressed situation cash truly is king. Accurate forecasting and day-by-day cash balances are often required to ensure any buyer is confident that scarce cash reserves are under proper control. 
  • Equity story and turnaround plan: Any buyer is going to want to understand the proposed turnaround strategy: how is the business going to enact its recovery and what value can be created that means the distressed business is worth saving? Clear presentation of this strategy is essential.
  • The business model: Clear demonstration of how the business model generates cash is required, with analysis that shows how financial performance will respond to key changes – whether these are positive improvements (e.g., increases in revenue) or emerging risks that further damage the business.  Demonstrating the business is resilient enough to cope with these changes can go a long way to assuring investors there is a viable future.
  • Management team: As outlined above, this is a challenging process. The management team are in it together and need to be consistent in presenting the turnaround. Above all, the team needs to be open about the underlying causes that resulted in the distressed situation arising.  A defensive management team who fail to acknowledge root causes of distress are unlikely to resolve the situation.

8 tips for successfully buying or selling a distressed business

  • Financing: More than in any traditional transaction, distressed businesses need to understand the impact on working capital. The distressed situation frequently results in costs rising as credit insurance becomes more difficult to obtain or as customers and suppliers reduce credit. Understanding how these unwind will be important to the potential investors.
  • Employees: Any restructuring programme can be difficult for employees. Maintaining open communications and respecting the need for consultation is the basic requirement. In successful turnarounds, employees are often deeply engaged in designing and developing solutions. Demonstrating a supportive, flexible employee base can often support the sale process.
  • Structuring: Understanding how to structure the business for the proposed acquisition can add significant value. Where possible, asset sales may be preferred, enabling buyers to move forward with limited liabilities. However, impacts on customers, employees and other stakeholders need to be considered.
  • Off balance sheet assets: In the course of selling a distressed business, additional attention is often given to communicating the value of items that may not be fully valued in the financial statements. Brands, intellectual property and historic tax losses are all examples of items that may be of significant value to a purchaser. Highlighting these aspects can make an acquisition more appealing.

“These eight focus areas can help to sell a distressed business and are important in reaching a successful outcome, but it should be noted that it will remain a challenging process,” Wainwright explains. 

With recent studies indicating that the valuation of distressed business is trending north. With increased appetite from buyers who are accustomed to taking on these situations, it is likely that more distressed deals will be seen in the coming months. “Preparing management teams as best as possible for delivering these will be key to ensuring these businesses can pass on to new owners who can hopefully drive the restructuring required to see these succeed,” Wainwright added.