Finding a winning formula for closing acquisitions

With the sixth annual M&A Awards producing some worthy winners, GrowthBusiness talks to some of the victors to find out the attributes needed for high-quality deals.

Mergers and acquisitions have the ability to be truly transformational for businesses, bringing in exciting talent, new customers and promising markets.

The capacity to close these kind of transactions has become increasingly difficult in recent years, with risk aversion meaning that dealmakers are having to pay more attention to due diligence to ensure that the acquisition stacks up.

Whether it is a hard-working CEO, progressive private equity partner or indispensable corporate adviser: dealmakers these days are earning their crust when it comes to getting transactions over the line.

These kind of dealmakers were celebrated at the annual M&A Awards, hosted by GrowthBusiness, when the best of the years deals, firms and personalities were lauded.

For British technology company Monitise, the fact that it was them who went across the Atlantic to make an acquisition shows how influential British technology is becoming and led to the business being awarded Cross-Border Deal of the Year at the awards.

Lee Cameron, chief commercial officer at Montise, was part of the team which saw the m-commerce company acquire California-based rival Clairmail.

California dreaming

‘As far as we are aware we couldn’t find another example of an AIM-listed company acquiring in the Valley,’ Cameron declares.

‘It’s huge statement for our mobile payment space, as a lot of what gets developed there comes out of the US.’

Monitise, which provides mobile banking and payments services, joined the Alternative Investment Market (AIM) in 2007 when it raised £100 million.

It has since gone on to grow its share price by nearly two times and now intends to use acquisitions to help build the company.

‘My team are sifting through piles of information memorandums from corporate financiers, bankers and businesses which see Monitise as a safe haven and somewhere they could grow with,’ Cameron explains.

‘We’ve a publicly-stated ambition that we will continue organic growth, but we are clear that where we see opportunities to acquire businesses which provide technology assets, management teams and IP, we will look at them seriously.’

The £173 million all-share deal for Clairmail has now given Monitise a foothold in the all-important American market.

‘There were about five companies that we looked at from the vast numbers in the space – and we did varying degrees of diligence on all of them involving remote and actual meetings,’ Cameron says.

‘But it became apparent equate early in the process that Clairmail were the right target.’

Customer over firm

Realising what is in his clients’ best interests was one of the prevailing reasons that Rupert Rawcliffe, director at Grant Thornton, walked away with M&A Personality of the Year at the 2013 event.

Rawcliffe says his approach of putting clients’ interests above that of his firm may be old fashioned, but it has led to the kind of repeat custom that is important in his world.

‘You always stick to the principle of listening first, so then you know what they want – it’s not just a case of making a quick buck,’ Rawcliffe says.

‘This is a long-term game, one which I’ve been in for 16 years, and if you do the right thing you have a better chance of them being successful. And if they are successful in the long-term they will come back to you.’

Today’s market, Rawcliffe says, is a tough play, but one which has buyers in it willing to pay well for good value.

‘There is not a shortage of cash at companies, and a lot of them are now looking for access into faster-growing countries,’ he explains.

‘What I’m seeing is that smaller businesses realise that they may need to partner with larger ones to be successful in the longer run – they can’t fight on their own.’

More on the M&A Awards 2013:

The risk element associated with dealmaking in today’s climate is a theme which Rawcliffe believes is evident, but not prohibitive.

‘We’ve got a recruitment deal going through right now, which will probably be at 2x EBITDA above where the market is and the buyer is saying it fits like a glove, but it is taking some time,’ he adds.

‘They are looking to de-risk and not end up taking a massive bet.’

One element which Rawcliffe believes is driving deals, albeit slightly under the radar, is the increasing prevalence for British business to engage in exporting.

‘It  hasn’t come through in government figures yet, but people are exporting more.

‘They looking at the emerging markets, as Europe is down, and there is a growing trend of people saying we need to do something differently.’

Rawcliffe has also seen more money circulating in the private equity space, where firms have lots of money but are looking for the best transaction.

Cultivating exits

One particular private equity firm which has had a successful year is Encore Capital.

Having successfully offloaded its investment in Probikekit through a deal with The Hut Group, the firm is now beginning to turn its focus towards new investments. The sale of Probikekit earned Encore Capital the UK Deal of the Year gong at the the M&A Awards, and came about following a relatively short involvement.

Khilan Dodhia, partner at Encore Capital, says, ‘Very early in our investment cycle we were approached by the eventual purchaser.

‘They highlighted to us why they were interested in the space, the fact they’d tracked it for some time and they were looking for value attributes.’

Encore Capital made sure to keep the interested buyer, The Hut Group, informed during the investment process and then had a tailor-made buyer at the end.

Prior to becoming involved with Encore Capital, Probikekit had already been through a deal process which had been successful.

‘We were able to benefit from that,’ Khilan says, ‘as we were coming from a clean slate saying this is what we need to do – coming at it without baggage.

Going forward into the rest of 2013, Encore Capital are keen to get back on the dealmaking circuit.

‘We’ve had a strong investment period, but at the same time this year has been dominated in the first year by exits,’ he says.

‘We also exited Forward Valeting Services, which we sold to Motorclean, and now have one sale transaction which we hope to complete imminently.’

Hunter Ruthven

Hunter Ruthven

Hunter was the Editor for from 2012 to 2014, before moving on to Caspian Media Ltd to be Editor of Real Business.

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