In the last in our series of blogs, we explore mergers and acquisitions (M&A) as a growth strategy and the key legal considerations. This follows the launch earlier this year of our in-depth report, Ambition 2025, which looks at the key drivers for growth of North West businesses – their strategic objectives for the year, the challenges that lie ahead in their respective sectors and the opportunities that exist in their quest for success. The report dives into a number of core areas that feature prominently in the growth ambitions of regional businesses. These include finance, people, innovation and sustainability.

In our fourth blog, we focus on the key topic of M&A, speaking to Corporate partner, Tom Hall, about its importance and what businesses need to consider from a legal perspective when scaling up. Sustainable growth requires scaling up in a way that protects the values, identity and continuity, which are fundamental to long term success.

The importance of M&A

According to research carried out by Pannone, as part of our Ambition 2025 report, demand for external funding is set to rise as North West businesses strive to meet their growth ambitions and long-term objectives.

An overwhelming 80% of regional businesses surveyed as part of the report are actively seeking funding to facilitate growth, with angel investment and growth capital the most favoured types of investment for North West decision-makers (21% each).

M&A activity is also set to increase, with mergers and acquisitions featuring prominently in businesses’ strategic plans. Over three-quarters of businesses in the North West plan to explore M&A opportunities within the next year. This trend is particularly prevalent in education (93%) and leisure (88%), with tech following closely behind (84%).

The survey clearly shows an appetite for M&A and reinforces the long-held belief that mergers and acquisitions are a highly effective mechanism to drive growth ambitions. Whether the objective is to acquire intellectual property, extend geographical coverage or access new products or service lines, the overarching purpose of an acquisition is to facilitate growth. It’s little wonder that many leading global companies have used acquisitions as part of their growth strategy, underscoring the importance of M&A in driving long-term expansion.

“Depending on the speed at which people want to grow their business, M&A is a very important tool,” explains Tom. “Growth can obviously be achieved in different ways; you can grow organically by hiring people, or by securing new revenue streams via client wins, but if you want to rapidly accelerate your growth plans then acquisitions are the best way to achieve that. With one deal, you can acquire talent, clients, infrastructure, distribution networks and IP, or you can immediately access new markets, geographies or products.”

Like many strategic moves in business, successful acquisitions depend heavily on getting the timing right.

“We don’t see many acquisitions by early-stage businesses,” says Tom. “This is largely down to financial capacity and experience, with few businesses of that size and maturity having the funds or know-how in place to buy another company. It’s more common for a business that, for example, has been through at least one debt or equity funding round, which puts them in a position to start exploring a buy and build project. At this stage, they ordinarily have greater transactional experience, a better sense of the market they are in and usually the backing of experienced investors / stakeholders who have been on similar journeys before.”

Key considerations

The path to a successful transaction is fraught with a number of pitfalls that can derail even the most strategically sound deals. Tom considers some of the key issues to tackle:

• Get your advisory team right – “This is probably the most important aspect of any deal,” says Tom. “A huge amount of value can be won (and lost) by engaging advisors that know what they are doing”. “Sadly, we do see occasions where parties have been let down by advisors that simply do not know their way around a transaction. Any costs that may have been saved by going with a cheaper option are almost always dwarfed by the value that is lost by their advisors being out of their depth and who miss crucial points. “Be sure that your chosen advisors have directly applicable experience and a strong track record of closing similar transactions in your sector. Do not be afraid to ask proposed advisors for a list of credentials and for references from previous clients of theirs,” explains Tom.
• Due diligence – “This is very much based on two principles – ‘buyer beware’ and ‘prevention is better than cure’,”says Tom. “It is infinitely easier (and cheaper) to arrange for the seller to fix a problem prior to completion than it is to try and enforce the legal documents and force them to do it after the deal is done.” An upfront legal audit allows you to assess and analyse any otherwise hidden risks associated with the target company and guides you as to whether there is anything that ought to be addressed pre or post-completion. The same exercise must be carried out for the financial and tax affairs of the target company. Specialised due diligence may be required depending on the sector.
• Resource management and integration – The process of acquiring and integrating another business is time consuming and will absorb a significant amount of resource from your organisation. “Would-be purchasers must remember that they still have to run a business while the acquisition process is going on, so at the outset it’s important to give proper thought to the roles and responsibilities of your team. It is not uncommon to have a division of labour, so that a certain team is assigned to the acquisition project while the remaining members of the team ensure your underlying business continues unaffected,” explains Tom. Careful thought and attention must also be paid at an early stage to post-completion integration, including technology, operating systems and, above all, culture. “You can have all of the perfect financial models in the world but if the people in the organisations just can’t work together effectively then any anticipated synergies of the acquisition will remain theoretical,” says Tom.  
• Project management – there are often many moving parts to a transaction, and trying to bring them all together in harmonious synchronisation on the closing day requires skill, experience and, above all, remorseless planning. “Time kills transactions, meaning that the deal team must meet / speak regularly during the project and continually work through the outstanding steps to completion,” explains Tom. The ability to “see around corners” and spot issues before they emerge is vital to ensure the smooth running of a deal; those businesses that can do this and plan a few steps ahead will usually emerge with a positive result within the proposed timetable.

Support and guidance

M&A offers compelling advantages for growth, including rapid market expansion, access to valuable resources, operational efficiencies, revenue synergies, and enhanced competitive positioning. However, the complexity and risks inherent in these transactions demand careful navigation by experienced professionals. “Advisors that understand both the opportunities and the risks on a deal can mean the difference between a transformative growth opportunity and a costly misstep,” Tom concludes.

If you would like to speak to Tom in more detail about the role M&A plays in your growth strategy, contact him on tom.hall@pannonecorporate.com or call 07920 237695

Pannone Corporate has advised APRIL Group, the leading wholesale insurance broker in France and Europe, on the cross-border acquisition of Lexham Insurance, a specialist two-wheeler insurance broker.

Lexham was established in 1999 and has since become a leading provider of moped, scooter and motorcycle insurance in the UK.

The acquisition reinforces APRIL’s ambition to expand its international footprint in specialist personal property and casualty (P&C) niche insurance, such as two-wheeler insurance, building on its presence in France and Spain. As part of the deal, Lexham CEO, James Miller, will continue to lead the business with his team.

Pannone’s corporate team included partner Tom Hall who co-led the deal with director Andrew Walsh, with further support from Belinda Cheung and Georgina Bligh-Smith.

Hall said: “This is a fantastic deal to kick the year off with – one that demonstrates the continued appetite of overseas investors and trade buyers, seeking to scale their operations internationally through strategic buy and build opportunities.

“APRIL has built up an excellent reputation in the European two-wheeler insurance sector and the acquisition of Lexham Insurance marks an important step in expanding its presence in the UK market.”

APRIL has a network of over 15,000 partner brokers internationally. With 2,400 employees, the company provides health and personal protection insurance, loan insurance, international health insurance (iPMI), property and casualty niche insurance and savings in investment products.

Marc-André Dupont, Head of APRIL Group property and casualty division, said: “We share Lexham’s passion for customer service and its recognised expertise in network management. With James Miller, who will continue to lead Lexham, we have begun to identify synergies that will enable us to create value across Europe.”

Lexham Insurance offers in excess of 20 different insurance products, including quad insurance, car insurance for motorcyclists, motorhome and camper, as well as motor trade and commercial insurance. It employs 200 employees across three UK offices.

Other advisors on the deal were:

• Charles Pétré and Olivier Cœnon of Caurus Partners (buy-side: corporate finance)
• Jenny Pape at Azets (buy-side: tax and structuring)
• Josh Bates at O’Connors (buy-side: regulatory)
• Osborne Clarke (sellers – legal )
• Grant Thornton (sellers – corporate finance).

Photo credit: Milos Muller

Pannone Corporate has advised on the sale of Eco-Readymix Ltd, a leading producer of mortar and concrete in the North West.

The company, which was established in 2004 and has sites in Wrexham and Ellesmere Port, was acquired for an undisclosed sum by Aggregate Industries, a member of the Holcim Group. The acquisition will reinforce Aggregate Industries’ position in the North West market and also help establish its place in the UK mortar market.

Pannone’s corporate team advised the shareholders of Eco-Readymix. The team included corporate partner, Tom Hall, Bez Borang and Sam Roberts. They were supported by James Harris, partner in the real estate team.

Hall said: “This is a fantastic deal. A regional business that is anchored in a traditional sector, but is forward-looking in its approach, particularly around sustainability and the environment.

“We’re delighted to see the business attracting the attention of a heavyweight, such as Aggregate Industries, and we will watch with great interest as the combined businesses make an even greater mark on the North West market.”

Eco-Readymix produces Ready to Use mortar and Dry Silo Mortar and serves national house builders, groundworkers and civil engineering firms alongside the domestic market.

It also produces ready mix concrete, liquid and traditional screed, concrete masonry blocks and aggregates. The company has strong sustainable credentials. Its Wrexham site is almost entirely powered via a biomass system alongside both wind and solar power. It employs 52 people across its sites.

Dragan Maksimovic, Chief Executive Officer of Aggregate Industries UK, said: “We are delighted to be able to announce the acquisition of Eco Readymix and welcome them to Aggregate Industries.

“As a business, it has clear sustainable values very much in line with our own and will strategically add to our strong footprint in the North West.

“This also marks our entry into the UK mortar market with a knowledgeable and ambitious management that has multiple synergies with our own. The acquisition supports our long-term strategy to continue to grow our business in order to become the UK’s leading supplier of sustainable construction materials and solutions.”

Picture credit: Iryna Melnyk

Pannone Corporate has advised on the cross-border sale of a controlling stake in North West company, Walker Sime.

The Manchester firm acted as legal adviser to the shareholders of Walker Sime, of which shares were acquired by Oregon-based Otak, part of the HanmiGlobal Group. The US company has taken a majority stake in Walker Sime, as part of the deal.

The Pannone team was led by Tim Hamilton (corporate Partner), Miranda Foy and Behzad Borang.

Walker Sime is a multi-disciplinary construction consultancy, which specialises in quantity surveying and project management. It has worked on a number of high-profile projects, including Network Space’s 200,000 sq ft industrial scheme in Altrincham and the £54 million Glass Futures in St Helens.

Tim Hamilton said: “We have worked with Walker Sime for a number of years and have followed the company’s impressive expansion, establishing itself as a leading player in the North West construction market.

“The sale to Otak is a perfect culmination of years of hard work and dedication by the team and a significant milestone in its ongoing growth journey. We were delighted to have acted for the company on this transaction and look forward to watching the next phase of its development, in particular in advanced manufacturing and the low carbon economy.”

The Walker Sime deal comes three years after Otak, a design and project management firm, acquired a majority stake in London-based consultancy K2. As part of the deal, Walker Sime and K2 will merge operations under the Walker Sime name, creating a team of around 130 with a national focus.

The financial advisors to the shareholders of Walker Sime were James Jennings and Chris Bentley of the Strategy Exchange.