Dealmakers: A smart move

The ongoing need to drive down energy bills and the accelerating transition to a greener future has powered the multi-million pound sale of an innovative Lancashire family business.

Blackburn-based Heatmiser, ranked fourth in last year’s Lancashire Business View’s Hot 100 list of the county’s most profitable SMEs, was acquired by a FTSE 250 business in a £110m deal.

The sale, in November, came as dealmakers revealed that the need for energy efficiency and the continuing journey towards net zero are driving the UK M&A market.

Looking back at the third quarter of 2022, Steve Ivermee, UK strategy and transitions leader at accountancy group EY, said: “A total of 459 completed domestic and cross-border deals took place during the quarter, predominantly in sectors like industrials, technology and energy, driven by the current energy market challenges and broader energy transition efforts.”

Heatmiser was founded in 1968, developing thermostatic control products for residential buildings, and has enjoyed success in recent years by pioneering smart thermostat technology.

In its most recent accounts, the company generated £7.8m pre-tax profit on revenues of £18.1m. It employed a workforce of 100. In the financial year to December 2022, Heatmiser was expected to increase revenues to around £22.5m.

We are particularly excited about the growth potential of the business in new territories

The company, based on the Shadsworth Business Park, was founded by Gordon Kay and had remained within the family, with Martyn and Sarah Kay at the helm. They will remain in the business.

The proposed initial fee for the sale is £110m, with up to a further £8m based on Heatmiser’s future financial performance. The business will become part of IMI Hydronic Engineering.

IMI is a Birmingham-based specialist engineering group employing around 10,000 people. It has manufacturing facilities in 19 countries and operates a global service network.

It believes that acquisition will bring “significant growth opportunities” in the UK and in Europe and represents an opportunity to accelerate its development in smart buildings.

The demand for smart temperature controls is growing rapidly and is expected to accelerate further, with more than 200 million buildings in Europe requiring renovation to upgrade their heating and cooling systems over the next 30 years to comply with energy efficiency and environmental legislation.

Roy Twite, chief executive of IMI (pictured above), said: “This is an important, strategic entry point to the rapidly growing connected controls market, that will accelerate our organic growth across IMI Hydronic.

“There has never been more urgency to deliver energy efficiency and comfort in buildings and Heatmiser is a leader in this space.

“I want to personally thank the Kay family for their commitment to the transaction and welcome the entire Heatmiser team into IMI.”

Heatmiser is one of the UK’s leading smart thermostatic control manufacturers for radiant systems, enabling homeowners to accurately control heating and cooling in each room remotely.

The company’s success has been based on its portfolio of high-quality products, strong customer relationships, digitalised commercial model and technical support.

It has established partnerships with heating installers and heating equipment manufactures across the UK. The company delivers more than 90 per cent of its products in the UK as well as in Europe, Australia, New Zealand, South Africa and China, where it operates a subsidiary in Beijing.

Martin and Sarah said: “We feel very proud of the business we have created at Heatmiser and we want to say a big thank you to our team for helping us achieve a market leading position.

“By listening to our customers and reacting to market change, we have become one of the UK’s leading HVAC control brands and we are excited about joining the IMI family and the opportunities this will bring.

“We are particularly excited about the growth potential of the business in new territories and our joint vision of creating a better more energy efficient world.”

In another energy sector deal, Bamber Bridge based Freedom Heat Pumps has been acquired for an undisclosed sum.

The heat pump distribution company is now aiming to continue its expansion following its acquisition by a distributor of fuel and lubricants.

The buyer was Warrington company Certas Energy, part of the FTSE 100 DCC Group and is another stage on its “energy transition roadmap”.

Freedom Heat Pumps has experienced a sustained period of growth and is on course to treble its revenue across a two-year period.

It opened a new 15,000 sq ft warehouse facility in Bamber Bridge in 2021 and has grown its staff numbers from seven to 25 over two years. The company supplies customers across the UK with ground and air source heat pump equipment as well as offering training and support.

Certas has been highly active within the acquisitions market having previously acquired multiple companies in recent times. It says the acquisition will allow it to strengthen its position in the sector while enabling further growth and development, Freedom’s managing director Chris Higgs said the acquisition represented a “strong opportunity” for continued growth from its Lancashire base.

He said it was now looking to continue that growth trajectory during the coming years through expansion opportunities across the UK. And he added: “The heat pump industry is continuing to grow and there are expected to be 600,000 heat pumps installed annually across the UK by 2028.”

Tom Eatough, corporate director at KBS Corporate Finance, advised the

Lancashire business. He said: “Completing a transaction in the midst of a turbulent economic and political backdrop presented its challenges, but Freedom is a high-quality business in an exciting sector, and I am sure it will be a great success for both sides moving forward.”