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west midlands specialist engineering bimbo shows that there is life on the deals scene 02/09/2008 The recent management buy-in buy-out of a West Midlands engineering firm has shown that the credit crunch has not stifled the market for medium-sized corporate finance deals.
Accura Support Services ('Accura') has changed hands in a £37m deal, which has seen the exit of some former shareholders including chairman Peter Andrews, who owned one fifth of the equity, and Barclays Ventures. New owners are the management team and August Equity, an independent private equity firm.
Birmingham and London law firm Martineau advised the vendors. Martineau partner Adam McGiveron, who led his firm's advisory team, said: "The successful sale of Accura shows that directors can achieve a sale even in these challenging times.
"This is possible where the business is a good one with a strong position in resilient markets.
"Though the credit crunch has reduced the interest of private equity buyers and backers for very large deals, and therefore the options for some vendors, there is still a lot of interest from backers for transactions in the under £50m bracket."
Accura, which employs 160 people and which reported annual sales of around £24m for its continuing businesses in the year ended 31 March 2008, supplies various markets including the oil and gas and aerospace sectors, where demand for the group's products remains strong.
The firm's main operations are categorised as Supply Chain Service and Technical Contract Services. Trade names in the former division are Linvic and Concept and, in the latter, Accura Geometric and Geneva.
Linvic supplies solutions in terms of pipes, flanges and pipe fittings while Concepts provides specialist forgings. Accura Geometric designs and manufactures tools and CNC machining capability and Accura Geneva supplies specialist components.
The group has a strong positioning in its key markets, which include offshore and onshore oil and gas and aerospace. One of its key selling points is the skills and precision which underpin its products and services.
Another positive factor is its robust markets, for example, as exploration for oil and gas has become more challenging. Price rises and supply shortages have led to further sourcing from fields that once would have been considered marginal in profitability terms but which are now looked on as mainstream. Accura solutions are more than ever needed for these situations.
Accura was bought out by its management team, backed by Barclays Ventures in 2005 and, since then, former chairman Peter Andrews and his team have refocused the business, a process which included the sale of a non-core business serving the commercial vehicle and off highway markets.
This kind of active strategic approach to building shareholder value is essential if deals are to be completed in a way that is satisfactory to vendors as Mr McGiveron explains:
"What happened to Accura between 2005 and 2008 was an excellent example. The board knew the direction they wanted to go in to maintain and improve margins and they reorganised the business activities to make the new structure customer focused.
"Where businesses have a clear and focused strategy that makes sense and a track record for delivering it, there are deals to be done. We are currently talking to a number of directors across the West Midlands and elsewhere, who are looking to achieve sales on just this premise.
"If the business is moving in the right direction, with an appropriate focus on strong markets and a reputation for client partnerships, innovation and quality, value can be delivered for vendors and there will be no shortage of private equity and banking backers for buyers.
"In cases that we have been involved in recently, there has been healthy competition amongst banks to provide loan finance and no shortage of investing support from private equity companies,"
Asked about the key differences on the deal scene since the credit crunch began to bite, Mr McGiveron says that due diligence processes have taken longer:
"It's probably no more than an acceleration of a trend that was happening anyway but the credit crunch has helped to make buyers nervous. There is also more evidence on areas like environmental reviews these days.
"The main effect of all this is to increase the length of time that the process takes and buyers and sellers alike need to plan for this."
Mr McGiveron's advice to West Midland directors is unequivocal: "Don't dismiss the possibility of achieving a good deal in the months ahead.
"Plan to build your business so that the trading operations and the organisational structures are consistent. Focus on improving market shares in strongly growing and resilient markets, and take action where you need to dispose of or restructure businesses that don't fit in with the plan.
"As far as the disposal strategy is concerned, plan early and take advice from advisers who are prepared to keep in touch as well as understanding the commercial realities."
For further information please contact Adam McGiveron on
adam.mcgiveron@martineau-uk.com
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