Dealmakers: Tempting targets for growth hungry overseas buyers

Lancashire has seen a trio of multi-million pound deals in the first three months of 2024 with the businesses involved proving tempting targets for growth hungry overseas buyers.

This strong start to the year has dealmakers now believing the M&A tide has begun to turn after what has been a lean period, with the county offering both growth opportunity and value to potential investors.

The latest headline-making deal involves tissue manufacturer Accrol. A bid to buy the Blackburn based group was made by a major European player in the sector at the end of March.

The deal completed after Navigator Paper upped its original offer of £127.5m to £130.8m.

The potential buyer is part of The Navigator Company SA, which is listed on the Euronext Lisbon Stock Exchange. The acquisition would create a business with £500m annual revenues.

Navigator is a large Portuguese integrated pulp, paper, tissue, packaging and biomass-based energy company, listed with a market capitalisation of approximately €2.75bn.

Its move came just two months after the sale of Star Tissue, one of the UK’s leading independent makers of hygiene paper products and also based in Blackburn, to a German headquartered hygiene group.

It is now owned by WEPA Professional, a family run business with a turnover of more than £1bn. No figure was been made public but it is reported to be a multi-million pound deal.

The hat-trick of early year deals saw Accrington based managed transport specialist CMAC Group bought by one of the world’s largest land transport companies.

The word ‘growth’ figures highly in all three transactions. This £80m-plus deal with the Singapore headquartered ComfortDelGro Corporation will “turbo-charge” CMAC’s growth, according to chief executive Peter Slater.

While Star Tissue’s Khalid Saifullah believes its sale to WEPA will act as the catalyst for its spectacular growth.

Accrol’s chief executive Gareth Jenkins believes its proposed sale will enable it to “benefit from the capabilities, scale, network and resources” of Navigator, “building on the strategic progress we have made to date.”

He says: “Accrol has undergone a period of significant transformation and growth over the last four years, investing in fully automating its tissue converting operations to enhance manufacturing capabilities.

“We have grown to become a leading manufacturer of private label, own branded and licensed tissue products to the UK market. Combining with the Navigator Group brings together a highly complementary product offering.”

The Navigator company is ranked seventh worldwide in capacity of production of fine printing and writing paper, processing more than 1.6 million tonnes of paper per year.

It moved into the tissue market in 2014, and expects Accrol to account for around 50 per cent of its total tissue turnover.

As António Redondo, chief executive officer says, the prospective deal aims to expand its commercial footprint to the UK market as it looks to play a long game.

He adds: “Accrol brings an outstanding business franchise, including an exceptional customer base, highly skilled employees, and a solid track record of producing quality tissue products.”

Looking at the bigger dealmaking picture, Ryan Bilsborough, manager in the corporate finance team at Blackburn headquartered accountancy group PM+M, says the expectation of interest rates and inflation falling further this year make it “credible” that M&A activity in the county will continue.

He sees that activity being driven by a range of factors such as market consolidation, strategic expansion and capital infusion. And he adds: “We believe Lancashire is poised for an upswing in M&A activity, signalling an end to one of the leaner periods for M&A in a decade.

“Whilst the strength and speed of the recovery remain uncertain due to lingering macroeconomic and geopolitical challenges, we believe we have reached a tipping point.

“We expect a steady increase in M&A as the year progresses. Indeed, a flurry of deals in the past few months suggests that this rise in dealmaking may already have started in some sectors.”

However, he adds a note of caution, saying: “Dealmakers will still encounter distinctly altered conditions.

“Notably, while credit markets have loosened, financing comes at a higher cost than in the past decade. This increased cost of capital will likely exert downward pressure on valuations, demanding that dealmakers work harder to generate value.”

Ryan reels off the reasons why Lancashire is attractive to companies looking to build their presence in the UK. They include its strategic location, strong industrial base, skilled workforce and record of innovation and research. The there is cost. He says: “Compared to some other regions in the UK, like the south east, the cost of doing business in Lancashire is lower, particularly when including factors such as property purchase and rental costs. This cost efficiency can be an appealing aspect for companies looking to expand or optimise their operations.”

David Simmons, corporate finance partner at accountants and business advisors Azets, says the UK continues to be an attractive market for overseas buyers, despite political uncertainty.

However, he adds the business attracting attention tend to be larger companies or those offering a niche product or service.

He cites Forsberg Services, based in Heysham, as a prime example. The precision technologies provider was bought by Norwegian software business Teleplan Globe AS in January, for an undisclosed sum.

And he adds: “The North West remains a key geographic due to its entrepreneurial history and approach, strong professional community, as well as universities and transport links to the rest of the UK and overseas.”

Rob Richardson, corporate finance partner at MHA, says: “Overseas companies targeting the UK for acquisitions look for quality businesses with experienced management teams.

“The acquisitions of CMAC Group and Star Tissue, as well as Accrol’s expected takeover, highlight this. They are major international deals involving high-quality growing businesses which reflect very well on Lancashire as an economy.”