Catalyst CF and PwC CF advise on Alcumus | Santia deal

07 December 2015 Consultancy.uk

Technology firm Alcumus has acquired Santia, a Cardiff headquartered health and safety and accreditation services provider, in a deal worth almost £50 million. The transaction was advised on by Catalyst Corporate Finance (buy-side) and PwC Corporate Finance (sell-side). 

Alcumus is a provider of technology-enabled compliance, certification and verification risk management solutions. The organisation, formed through the integration of five companies, serves over 8,000 clients, including more than 20% of the FTSE 100. Just two months ago Alcumus completed a £92 million buy-out from its former owner Sovereign Capital, supported by private equity firm Inflexion, with the aim of accelerating its growth.

Alcumus - Your Trusted Partner

As part of its expansion plans, Alcumus has bought Santia, in a move which significantly broadens its footprint in the accreditation and certification market. Santia, which is headquartered in Cardiff and has a regional office in Nottinghamshire, is one of UK’s largest providers of health & safety risk management solutions, and following the integration the enlarged business will employ 700 professionals, serving over 30,000 clients both in the UK and internationally. Martin Smith, CEO of Alcumus, says “The addition of Santia represents a significant development for Alcumus; the combined Alcumus and Santia business makes us the major player in risk management solutions in the UK.”

The £47 million deal was advised on by Catalyst Corporate Finance, a corporate finance firm with three offices across the country that focuses on the mid-market, and the M&A practice of Big Four giant PwC. Catalyst Corporate Finance supported buyer Alcumus with among others financial advisory, and transaction support throughout the due diligence process and negotiations phase. For both parties it was the second engagement in the space of just a few weeks – Catalyst Corporate Finance also supported Alcumus financially with its buy-out. “We have worked with Alcumus for some time having advised the shareholders on the buy-out earlier in the year and we are continuing to work with them as they seek to grow the business and expand their offering. They are a great team and this acquisition marks a significant step forward in achieving their ambitious business plan,” comments Richard Holden, Director at Catalyst. 

Commenting on the support by Catalyst, Smith says that Catalyst’s advice and support “has been invaluable” in achieving a successful deal.

Martin Smith - Richard Holden - Rob Asplin - Marc Davies

The shareholder of Santia, Better Capital, who acquired the company on 1 February 2011 from the administrators of Connaught, was advised by PwC Corporate Finance, which was engaged in the summer of this year to find a buyer for Santia as part of the private equity firm’s wider strategy to shrink its investment portfolio*. “Having attracted significant early interest from both a range of strategic and financial investors, Alcumus was identified as a strategic bidder following a competitive auction process,” comments Marc Davies, who heads PwC’s West & Wales Corporate Finance practice. He believes that the deal represents a great outcome for all those involved, also referring to the of 2.8x exit return enjoyed by Better Capital, stating “all parties have worked tirelessly to deliver this fantastic deal result.”

Rob Asplin, who joined Better Capital shortly after its formation in January 2010 (by private equity veteran investor Jon Moulton) from BDO and now leads the transacting team, says he is pleased with the outcome, as well as process, commenting: “Looking back at the timetable PwC designed at the beginning of the process, we hit it almost to the day, which is a great achievement. Their excellent relationships with the buyer population, sector insight and a well-structured process helped deliver a very good return for Better Capital.”

* Better Capital for instance recently offloaded Fairline, the yacht-maker, and is currently exploring the sale fashion retailer of Jaeger.

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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.