On the record

M&A reports on businesses seeking acquisitions, make disposals or to list on the markets in the coming months.

This month:

Concept Fire & Security
MacFarlane Group plc
United Drug plc
Sanderson plc

Concept plans further acquisitions

Welsh security and safety firm Concept Fire & Security plans to make two further acquisitions following its recent purchase of rival South Wales Cameras, its managing director has confirmed to M&A .

“This [South Wales Cameras acquisition] is the first of three that we’re looking to do over the next 12-18 months,” said Steve Smith, managing director of Concept. “We’ve got a couple of people we’re loosely talking to and I’m also working alongside Barclays Venture Capital… to look for the next acquisitions.”

Cardiff-based South Wales Cameras, a specialist in designing, installing and maintaining CCTV, access control and intruder gates and barriers, was acquired in May for an undisclosed sum. The deal was Concept’s first acquisition in its six-year history.

Concept is now on the lookout for further acquisitions in this sector to complement its CCTV-based security services, but Smith admits he will be discriminating. “We look at the ones that stand out to us,” he said. “We don’t just go and buy anything; we don’t buy companies that are in trouble.

“We’d like to buy successful businesses that don’t have the skills sets we have. I’ve got a tremendous engineering base… and a sales base [at Concept]. A lot of companies are weak in those areas; they’ve got the contract value… but struggle with organisational skills. That’s what we can breathe into a new business.”

While Cardiff-based Concept’s first acquisition was in Wales, the business is looking UK-wide for its next deals. It already has an office in Exeter.

The company paid for South Wales Cameras from its existing resources, but Smith is looking to get a venture capitalist on board to help fund future acquisitions. He anticipates buying businesses with a larger turnover than South Wales Cameras’ £415,600, up to £1 million with a consideration to match.

Barring further acquisitions, Smith predicts Concept’s turnover will rise to £1.8 million in the next year from its current £1.2 million following the South Wales Cameras deal. He added that the ultimate aim of the acquisition strategy is to bring Concept’s turnover up to between £4 million-£5 million within the next five years.

The strategy was established to maintain the company’s year-on-year growth rate. Until now, the company has grown by organic means, but this is now tapering off and Smith felt the time was right to make acquisitions.
Daniel Parton

MacFarlane fighting back with acquisition plan

Packaging firm MacFarlane Group plc plans to make more acquisitions as the company fights back after a troubled 2006.

Chairman Archie Hunter confirmed in the company’s recent AGM statement that “carefully targeted and manageable acquisitions” are being pursued.

This is welcome news for MacFarlane, which put out a profit warning last summer after it was hit by steep rises in costs driven by suppliers; profits for 2006 dropped by more than 30% to £2.05 million, compared to £3.38 million the previous year.

Nevertheless, there were more positive notes from MacFarlane’s results. The company’s turnover was up 2% in 2006 to £130.1 million, its pension deficit has been cut to £11.1 million from £16.1 million and debt has also been reduced. Also, according to Hunter, margin controls were tightened in the second half of 2006 and have duly recovered and continue to do so.

In addition, MacFarlane’s various business units continue to trade relatively well. Organic turnover in its packaging distribution business is up 10% year on year. Its e-commerce arm, Packaging2U, is also growing at “encouraging levels”.

This has helped MacFarlane’s share price recover some ground. When the warning was released on June 28, it dropped by 10p to 35p and continued a steady decline until March, when it reached a low of 27.75p. But since announcing its yearly results, MacFarlane’s shares have recovered to 32p at the time of writing, giving the company a market cap of some £36.8 million.

“The board believes that that the group has gained from the experiences of 2006 and its response to them,” Hunter said. “It is confident that the key businesses on which we will concentrate in 2007 have been strengthened. Further acquisitions will be pursued.”

According to press reports, Glasgow-based MacFarlane is looking to acquire businesses to improve its presence in the Thames Valley, Kent and Scotland.
Daniel Parton

United Drug announces euro300 million war chest

Irish pharmaceutical and healthcare supply chain services supplier United Drug plc is in talks with several targets as it seeks to spend its war chest worth between euro200 million [£135.8 million] and euro300 million [203.8 million].

“There are a number of arenas we are looking at,” Liam Logue, United Drug’s acquisitions corporate development officer, confirmed to M&A . “At any one time generally it is very rare for us to be talking to less than half a dozen companies. There is a lot going on at any time in the year. That is the case now.” Logue added that he expected deals to be completed before the end of the year.

While Logue would not expand on the specific targets United Drug is in negotiations with, he did outline the areas the company is looking at. He said the company plans to expand its pharmaceutical contract packaging and fulfilment business and extend it further into continental Europe – it is already well established in the UK and Belgium – and adding ancillary services to its packaging division, such as contract manufacturing services. The company is also targeting growth in North America.

Typically, United Drug seeks niche companies with a deal value between euro20 million to euro100 million, according to Logue. “However, where there are more appropriate… opportunities we have no qualms with going bigger than that if we have to,” he said.

Logue believes there is ample opportunity for deal making in the market. “There is still a lot of fragmentation, a lot of private companies operating in the market, a lot of owner-managers and I think that is an opportunity for us as a consolidator within that,” he said.

Dublin-based United Drug’s acquisition hunt comes on the back of strong interims. For the six months ended March 31, 2007, the company posted pre-tax profits of some euro29 million, up 16% year on year, while its turnover increased by 9% to euro770 million.

In that six-month period, United Drug also acquired Pyramed, a UK-based distributor of medical devices, and the pharmaceutical packaging division of Belgian firm Budelpack International.

These acquisitions and results have been welcomed by the investor community, with United Drug’s share price climbing to euro4.16 at the time of writing from euro3.59 on November 30. This has pushed the company’s market cap to euro941.6 million.
Daniel Parton

Sanderson plans more acquisitions

Sanderson Group plc , which supplies market-specific IT software and services to the multi-channel and manufacturing markets in the UK and Ireland, plans to make more acquisitions.

The Coventry-based company will spend up to £30 million on two or three UK acquisitions in the next year. “We’re looking to make one or two acquisitions within the next six months, spending between £3 million-£10 million per company,” said executive chairman Christopher Winn. “The acquired companies will be in the IT software solutions sector,” he added.

Sanderson, which employs more than 250 people nationwide, has made three acquisitions since July 2005, most recently K3 plc in February this year for £2.5 million.

Sanderson, which floated on AIM in December 2004, raising £5.1 million, will look to Royal Bank of Scotland to provide financial advice and additional funding if needed, according to Winn. Its current share price stands at 52.50p, after an initial pricing of 50p, with a market cap of £21.95 million.

The company’s interim results for the six months to March 31, 2007 show revenue from continuing operations of £8.12 million, up from £7.3 million in 2006. Its profit after tax from continuing operations fell to £540,000 from £690,000 made in 2006.

Sanderson’s interim results stated that the group’s multi-channel business performed well, while the manufacturing business continued to experience difficult trading conditions.

“Notwithstanding the continued challenges of business in the manufacturing sector, the multi-channel markets are proving to be very active and rewarding for the group and overall we anticipate an improved business performance in the second half,” Winn said.

“Sanderson has re-positioned itself to enjoy greater repeat revenues and a lesser reliance on the manufacturing sector. A stable client base and products that cater specifically to today's multi-channel markets give us a very good base to continue to grow organically and by acquisition,” he added.
Paul Driscoll

Round up

While many companies are still looking to grow by acquisition, some are taking advantage of the appetite for deals by putting businesses up for sale.

For example, Birmingham-based private equity firm Harris Watson has put womenswear retailer Viyella up for sale, with corporate financier SP Mergers charged with sounding out potential bidders, according to press reports.

Harris Watson could cash in with any sale. Press reports speculated that Viyella could sell for about £20 million, which would give Harris Watson a return of about eight times its initial £2.5 million investment in 2003. In that time, London-based Viyella has grown to have more than 30 stores and some 70 concessions.

Others, meanwhile, are on the acquisition trail. Car dealer Lookers plc , which acquired BTN Turbo Charger Service for £3 million in cash on May 17 through its FPS subsidiary, is seeking further acquisitions, its chairman said in the company’s AGM statement.

A bullish Phil White said Lookers had made a good start to 2007, with like-for-like sales in its franchise dealer network ahead of the new car market and in line with its expectations.

“[Lookers] continues to make strong progress,” White said. “Through our proven successful strategy, we remain dedicated to expanding our complementary business streams through both organic growth and strategic acquisitions.”

Elsewhere, The PLUS Fund , an investment vehicle, is seeking to raise £1 million ahead of a possible flotation on AIM or PLUS, according to press reports.

The fund, headed by Tony Drury, ex-head of corporate adviser St Helen’s Capital, is said to have already raised £250,000 and plans to provide finance to businesses that have the potential to float on PLUS or AIM within two years.

Another press report speculated that Canadian e-marketing firm Silverback Media plc is planning to move to AIM from PLUS later this year.

Silverback, which owns and operates interactive, online and mobile advertising and marketing networks, and provides e-marketing services and technology solutions to assist marketers, joined PLUS in November last year, raising some £2 million. It has also received more than £500,000 in venture capital from General Capital Venture Finance in December.

However, its share price has since dipped to 24.5p from 45p at admission and its market cap stands at £5.6 million at the time of writing.

A spokesman for Silverback said that there were no concrete plans for a move to AIM, but that it nevertheless could happen before the end of the year.
Daniel Parton