Tue, 25 Jul 2023 | BUSINESS SALE
Kettering-based building products and systems supplier the Alumasc Group has agreed a deal worth up to £10 million to acquire the ARP Group, a distributor and manufacturer of specialist metal rainwater and architectural aluminium goods.
The deal, Alumasc’s first since 2018, forms part of the company’s strategy to supplement its organic growth through earnings accretive bolt-on acquisitions. The consideration comprises an initial £8.5 million payable upon completion adjusted for net cash/debt and normalised working capital. An additional consideration, capped at £1.5 million, is payable subject to ARP Group’s performance in the two years to November 2024.
The full consideration would represent close to a 7.7x multiple of ARP’s adjusted EBITDA of £1.3 million for the year to February 2023, generated on revenue of £10.8 million. At the time, the company’s consolidated net assets were valued at £4.5 million.
Announcing the deal, Alumasc said: “The acquisition multiple based on the initial consideration is approximately 6.8x, which is expected to reduce to below 5.0x over the medium term, assuming full payment of the earn out consideration, and achievement of expected operating synergies.”
The buyer added that ARP is expected to be immediately accretive to its underlying earnings, with the acquisition being funded from current debt and cash facilities.
Leicester-based ARP was founded in 1987 and operates from four facilities, covering over 47,000 sq ft. Alumasc said that the group “shares many qualities with Alumasc, including strong relationships with contractors which will complement Alumasc’s business model.”
Alumasc Chief Executive Paul Hooper commented: "This acquisition aligns with our strategy of accelerating our organic growth with complementary bolt-on acquisitions. ARP will broaden the group's existing product offerings, and augment the routes to market for both businesses."
The deal is conditional upon the Competition and Markets Authority (CMA) indicating that it has no further questions regarding Alumasc’s submission in relation to the deal and that it does not intend to make a phase two referral. Alumasc’s directors expect this process to conclude and the acquisition to close within the next three months.
Amid increasingly challenging market conditions, M&A is emerging as a key trend in the UK's manufacturing sector.
Read about the growing popularity of earnout deal structures in M&A.
A reputable supplier of spare parts to the heating and plumbing sector, this established business boasts steady growth and a strong cash flow track record.
This business presents a unique opportunity to acquire a well-positioned enterprise in the heart of Scotland, ready for further growth and development.
An opportunity has become available to acquire the business assets, both tangible and intangible, including any associated goodwill, of a well-established wholesaler and retailer that was incorporated in 2015.
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