In-house expertise and large corporate finance support in a broad span of deals
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Despite the wealth of support on offer, companies involved in small acquisitions can often handle M&A on their own. The in-house team at Intertek, a global provider of safety solutions listed on the London Stock Exchange, has made several acquisitions this year, such as the recent purchases of Hi-Cad, a 3D data capture specialist, and 4-Front Research, which offers analytical support to clinical research programs.
The team, which fluctuates between three and four people in size, handles acquisitions from first contact to negotiation and completion, with support from Intertek’s regional divisions.
‘We’ve had a permanent M&A team in some shape or form for four or five years,’ says Intertek’s corporate development manager Chetan Parmar. ‘With current transaction sizes, the in-house team pretty much does everything. There hasn’t been any need for corporate finance support, but that could change if we start looking at bigger targets.’
Intertek is keen to spread its global reach and relies on its divisional teams to investigate any regulatory issues that may crop up. ‘Our divisional teams understand the local market and regulatory conditions,’ comments Parmar. ‘Outside support becomes necessary only when we are moving into a new sector, of which we don’t have regulatory knowledge. At this point an adviser would be called in. Each acquisition is carried out on a case-by-case basis.’
Acquisitions are generally handled in one of two ways: Intertek either makes contact at a divisional level, or is informed about a coming sale by a broker and gets involved in a bid process. ‘From the moment of first contact to completion can take anywhere from six months to three or four years,’ Parmar says. ‘That’s how long it takes to establish a good relationship with the owners.’
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For bigger, more complex deals, or when the necessary expertise isn’t available in-house, corporate finance support becomes essential. One example of this is the acquisition of London and Dublin-listed Horizon Technology Group by Avnet, a US-based distributor of electronic components. Under the terms of the deal, Horizon shareholders will receive €1.18 ($1.82) in cash for each Horizon share, valuing the company at a touch over €100 mn.
During the sale, Dublin-based Horizon used Davy Corporate Finance, a division of Davy, Ireland’s largest stockbroker, as its financial adviser. ‘For a target company, we perform two roles,’ explains Ivan Murphy, a director at Davy, who led the deal team. ‘First, we advise the board in relation to any approach, so we advise on the regulatory side of things, the takeover rules and the applicable listing rules. Second, we speak to the client about the valuation placed on the company and whether or not it is sensible to pursue the deal.’
Horizon also uses Davy as its stockbroker. This has advantages for IR when a bidder shows up. ‘As we are a broker house as well as an advisory house, we have channels to most institutional shareholders,’ says Murphy. ‘If required, we will talk to shareholders on behalf of the company. Most of the investors in a firm like Horizon would be clients of the broking business, so we have regular contact with most of them.’
Details correct at time of going to press.
