Archive for the ‘Done Deals’ Category
This is according to the annual ‘Survey of Pub Sales’ carried out by leisure property specialists Fleurets. The survey revealed the stability of the pub sales market in general, which is surprising considering the political, regulatory and economic turbulence over the past twelve months.
The number of worldwide business acquisitions in 2014 so far has topped the levels set in the past five years, with the M&A market now reaching pre-recession highs.
According to data from Thomson Reuters, in the first nine months of this year, the total value of global deals reached $2.66 trillion (£1.64 trillion). This is a massive 60 per cent rise in the figure at this point last year, with the number of M&As valued at $5 billion or more hitting a new high.
The figures are indicative of the growing confidence among business buyers; as the majority of industry sectors start to witness signs of sustained growth, people are more assured that they will see positive returns on their investments. However, particularly strong performances by the energy, technology and healthcare industries might be slightly distorting the overall level of M&As taking place.
Nevertheless, it is clear that the conditions for buying businesses are improving and the combination of increased capital and confidence within companies is leading them to explore avenues for inorganic growth. After five years of business people having to struggle to survive or settle for minimal, steady growth, there has evidently been a sudden surge as people wish to accelerate their expansion.
The valve has been opened and the pressure that mounted throughout the economic recession is being released in the form of more aggressive growth strategies. This means that speed in finding, researching and pursuing acquisition opportunities – particularly the highly sought after distressed businesses – is at a greater premium than ever.
As the M&A market climbs a steep upward curve, competition among business buyers for good value deals is going to increase. Ensuring they have their finger on the pulse is going to be key for those looking to add further to this year’s improved acquisition pot.
When Apple bought Dre Beats (Beats Electronics) for $3 billion it made the headlines. When Facebook bought Whatsapp for $19 billion it even sparked a little interest among those outside the technology sector. When Comcast bought Time Warner for $45 billion people were wide-eyed and open-mouthed at the sums of money flying around.
However, in the grand scheme of things, this year’s seemingly big deals are little more than molehills standing amongst mountainous deals that comfortably dwarf them. When two big companies become locked in an almighty acquisition arm wrestle, it takes huge amounts of money to sway the outcome one way or another.
And so, to illustrate this point, here is a look at the 10 biggest business acquisitions of all time:
10. Comcast bought AT&T Broadband from AT&T in July 2001 for $76.1 billion
9. Royal Dutch Shell bought Shell Trading and Transport in October 2004 for $80.1 billion
8. Exxon bought Mobil in December 1998 for $80.3 billion
7. AT&T bought Bell South in March 2006 for $83.1 billion
6. Pfizer bought Warner Lambert in November 1999 for $87.3 billion
5. Fortis, Banco Santander, and Royal Bank of Scotland bought ABN AMRO Holding in April 2007 for $100 billion
4. Shareholders bought Philip Morris International in August 2007 for $107.6 billion
3. Verizon Wireless bought Vodafone (45 per cent share in Verizon) in September 2013 for $130.1 billion
2. Vodafone bought Mannesmann in November 1999 for $185.1 billion
1. AOL bought Time Warner in January 2000 for $186.2 billion
Let’s review: considering that these 10 blockbuster deals date back over 15 years, it demonstrates just how rare it is that mergers and acquisitions on this scale take place. Furthermore, we can also see that oil and gas and telecommunications feature prominently on the list; this is, of course, reflective of the huge size of the global companies operating in these sectors.
Nevertheless, to return to the real, everyday world, regardless of the amount of money involved in a deal, the same due diligence and careful consideration needs to be applied to ensure the acquisition represents good value and a good opportunity for growth.
‘To stand on the shoulders of geniuses’ is often used in a derogatory tone, almost to imply laziness and corner cutting. In reality, it’s a smart approach – why break your back doing something that has already been done when the option might be there to simply capitalise on the groundwork carried out by others. That’s why inorganic growth through business acquisition can be so attractive and so effective.
On the other side of the coin – if you can prove that your business has a valuable product, service, asset, contact list or business model then you can expect to see the sizeable increase in the returns you get should you sell the business – that’s why it is always so important to have an exit strategy in mind from day one so you can focus on maximising value.
If you are a business owners, considering the sale of your business we offer a confidential free business valuation from our business transfer partners, get in touch for more information.
Investors in Sunseeker International has enjoyed a massive windfall from the sale of the luxury yacht business.
Bus tycoon Sir Brian Souter pocketed more than £100 million in profits on his investments in recent months, largely thanks to the sale of a 92 per cent stake in Sunseeker to Chinese billionaire, Wang Jianlin. Sir Brian isn't the only one to benefit from the business sale. Golf ace Rory McIlroy and Australian business, Macquiarie Bank, are among the others to benefit for the sale.
Those who profited were members of a consortium which bought a majority share in Sunseekers back in 2010. The business was in some difficulty back then and the group only paid £25 million, so the sale of the stake for £390 million represents a massive profit for investors and a hugely successful business turnaround.
Wang bought the stake through Beijing-based Dalian Wanda Group, which he controls. Wang commented: “With the committed support of Wanda, Sunseeker is well placed to take full advantage of opportunities in China, one of the world's fastest-growing luxury yacht markets.”
Before the consortium – led by Dublin-based private equity group FL Partners – bought the majority stake in 2010, the company had recorded a pre-tax loss of £9.1 million in the year to July 2009, compared with a pre-tax profit of £17.8 million in the previous year. The tight economic climate in the wake of the financial crash had a small impact in the drop in earnings but an unexpected bill of £6.1 billion to bail out a distributor pushed the company into serious liquidity problems.
The new owners managed to turn the business around, particularly because, as Sunseeker's Crowley noted, the company's troubles were only skin-deep: “What attracted us [to Sunseeker] was that right through the recession, Robert kept on investing, almost to his detriment in the end, and revenues never took a real hit as a consequence.
“The company wasn't immune but the problems weren't about the core business. He just ran into liquidity issues. The only thing that was missing was financial stability.”
The business has overcome the cashflow problems and grown enormously since it changed hands. Its dependency on high net worth individuals has meant that the downturn in global spending that has affected many businesses has hardly made a dent on its customers' finances – prices for yachts start at around half a million and the latest models cost around £20 million – a dip in the markets is not going to be a problem for people with this kind of cash.
We hear endless talk about the opportunities and profit that businesses can make through careful acquisitions, but it's great to see some real case studies now and then.
Booker is the latest company to show some significant gains following its buyout of cash-and-carry group, Makro.
Even excluding Makro's contribution, Booker's revenue was up 3.5 per cent to £4 billion when it announced its financial details earlier this week. Its pre-tax profit had also shot up by 13 per cent to £101 million.
It seems that the buyout has improved perceptions of both businesses. Charles Wilson, Booker chief executive, commented: “Customers are beginning to see some Booker lines going into Makro and Makro lines going into Booker. That will improve price perceptions particularly for Makro.”
He added that the tie-up will result in “choice, price and service improving and a lot of 'delivered growth'”.
Analysts are also seeing some positive changes come through and are already predicting good things for both businesses. Philip Dougan, an analyst with Panmure Gordon, told The Times: “We are assuming that Makro will enhance earnings from year one, and we believe that there is upside potential to our long-term forecasts.”
Booker's acquisition has given it a new route to quick expansion, even during the economic downturn, and it should help the company to continue to increase its revenues working in a sector that it already has a sound working knowledge of.
Tesco is due to put its latest acquisition straight to work in order to broaden the appeal of its existing business.
The supermarket has today confirmed its purchase of the Giraffe chain of restaurants for £48.6 million. This follows its recent purchase of a 49 per cent stake in Harris and Hoole coffee shops and the firm's investment in the Euphorium Bakery chain.
The acquisition spree comes shortly after the company conducted a revamp of its UK stores and is part of broader efforts to secure growth. To do this, Tesco hopes to create “retail destinations” for its customers through the provision of restaurants and retail services at the same locations.
Kevin Grace, the retail group's commercial director, commented on the developments, noting: “We think our customers will love it.”
A true test of Tesco's brand strength will be how the company responds to the recent horse meat allegations that have plagued its ready meal division. But the company is making good progress with revitalising its business and in January posted its strongest UK Christmas sales growth in three years, suggesting that it has a strong base to build on.
It noted that there is still “a lot more to do”, but the company is putting its Giraffe acquisition to work in order to increase the attraction of its retail premises, which could well put things back on track sooner than expected.
News reaches us that the ‘financial consumer champion’, Martin Lewis, has sold his Shepherd’s Bush-based MoneySavingExpert.com business for a handy £87 million to none other than the UK’s biggest financial comparison operator, MoneySupermarket.com.
Kudos to Martin for selling the bootstrap operation he started as a one-man-band for £100 in 2003 and which now has 42 employees, generating on average nearly £300,000 each in annual net profit.
According to the MoneySavingExpert website, it prides itself on its independence. “Our ethical stance and Consumer Revenge approach have made [MoneySavingExpert.com] the UK's official No. 1 money site with over 13 million unique users a month”.
On a FAQ page about the purchase, MoneySavingExpert.com says it plans to retain editorial independence. That ought to be taken with a pinch of salt. MoneySuperMarket is a ruthless operator and after shelling out this sizable sum, they might be inclined to immediately rummage through the site to see what can be leveraged to their advantage. Who wouldn’t?
The visitor stats revealed on Martin’s site may be a little outdated – according to Alexa (which can be vaguely accurate sometimes), the website receives 1.1 million unique visitors a day and over 4 million page views. That’s a very targeted advertising property, so there is a possibility that some editorial independence may be granted. For a while. Or at least till the earn-out completes. Lewis is said to be receiving £60 million in cash and up to £27 million on completion of the earn-out in 3 years.
What a profitable company MoneySavingExpert.com is though. It made NPBT of £12.6 million on revenues of £15.8 million in the last financial year. That level of profitability puts many of the other dotcom companies to shame, and the earnings multiple of around 7x looks not a bad buy at all for the financial aggregator.
Insurance company Swinton has said its vigorous strategy of acquiring other businesses has seen its income boosted by nearly a third despite it being a difficult year in the insurance market.
The Manchester-headquartered company made 33 acquisitions in the year to December 2009, writing down more than a million new policies and growing its net income by 29.4 per cent to £263.2 million.
Its acquisitions saw it add 116 new branches to its UK-wide portfolio, which now stands at a total of 603.
Chief executive Peter Halpin investing in high street branches through acquisitions has seen it stand in opposition to competitors, many of whom have sacrifices their high street presences in favour of focusing on online sales.
He said, "Adding 1 million extra policies in 2009 is an impressive demonstration of our growth-through-investment plan, which we will continue through both strategic acquisitions and organic growth over the next five years."
He explained that their investment in on and off-line channels is planned to continue into 2011. The company's headcount rose in the year to December 2009 from 3,383 to 3,654 and Mr Halpin said he could firmly credit their approach to business with encouraging brand loyalty and winning new customers.