UK support services attract investment despite uncertainty
At a time when the fortunes of the global economy seem to change almost on a daily basis there remains a strong appetite for investment in the UK, particularly in the support services sector.
The past year has been an interesting period for deal activity in the facilities management sector. Against a backdrop of the tightening public sector purse, well-funded large and mid-size corporates increasingly started to look at consolidation within their own, and adjacent sectors, in order to maintain bottom line profitability, while continuing to deliver reduced price to their demanding customer base.
Acquisitions continued on a cautious footing however; the failure of the G4S and ISS merger was indicative of the close spotlight being focused on investment decisions to ensure that corporate activity is value accretive rather than turnover enhancing. This behaviour has ultimately acted as a check on valuations in more austere times. To date, 2012 has seen a continuation of consolidation in the sector as businesses come out of the price/margin readjustment phase and consider their strategies for growth. Owners who have successfully transitioned their businesses to operate in a tougher economic environment are demonstrating a desire to monetise their existing client base more effectively, by cross selling a broader range of services to them within the facilities management arena. This is driving a flurry of mergers and acquisitions activity in the £5 million to £100m turnover bracket and this is a trend we expect to continue for some months to come.
The UK contract logistics sector continued to demonstrate a good level of M&A transactions in 2011 despite on-going weak economic conditions and a ’soft’ valuation environment. A key feature of the recent transactions has been an increase in the number of midmarket transactions; that is transactions involving privately-held companies. This reflects a theme that Grant Thornton Corporate Finance has been experiencing over the past two years – that consolidation among medium-sized companies needs to accelerate in order that this type of company can remain competitive, and we expect this mid-market consolidation to continue. Private equity interest in the sector will continue to be focused on niche-type logistics businesses – either serving a specific, high growth sector (eg waste & recycling) or providing a specific higher-value service.
Deal activity in the recruitment, training and HR services sectors is on the increase, with a range of transactions taking place despite a highly challenging environment for the funding of ’people’ businesses. Businesses in this sector are traditionally perceived as highly cyclical, with growth and profitability closely aligned with wider economic confidence. Key deal drivers during the year include private equity funders’ desire to exit existing investments in the sector (with these assets often changing hands to other private equity owners), corporate acquisition of niche capability or access to new markets, and consolidation driven by the need for scale amid intense margin pressure, with a number of distressed assets becoming parts of larger groups. International growth remains key to a number of players in recruitment that service global industries. Examples include oil and gas and financial markets. Ones to watch
There are a number of success stories within the support services sector in the Solent region
Cleansing Service Group
Headquartered in Fareham, Cleansing Service Group is the second-largest privately-owned waste management company in the UK. Established in 1934, it continues to see a tradition of expansion and organic growth. With 19 sites throughout the UK, the Group attracts customers from many sectors including government agencies, utility companies, leading supermarket groups and multi-national forecourt chains. The Group employees 396 staff and has a turnover of over £53 million.
Cleansing Service Group website
Meachers Global Logistics
Established over 50 years ago, Meachers Global Logistics based in Southampton is an independent provider of logistics services, from freight forwarding and warehousing through to supply chain management, transport and distribution. The business which has a turnover in excess of £20m and employs over 150 staff combines industry knowledge and know how, with best practices, advanced technology and experienced staff to drive efficiencies and stay one step ahead of industry demands.
Meachers Global Logistics website
Advanced Resource Managers
Formed in 1996, south coast-based Advanced Resource Managers operates as a technical recruitment specialist focusing on automotive, infrastructure and built environment, defense, IT and technical sales, power and energy, space, telecommunications and manufacturing industries. The company employs 157 staff and has a turnover of over £96m.
Advanced Resource Managers website
For more information on the support services sector in this region, contact: