Renew acquires Amco for £19.8 million

Renew Holdings plc (Renew), the AIM-listed specialist engineering and construction services contractor based in Aberford, West Yorkshire, has announced its intention to purchase Amco Group Holdings Limited (Amco), a specialist engineering business headquartered in Barnsley, for a total consideration of £19.8m, funded out of existing cash and a term loan provided by HSBC Bank plc.

The acquisition constitutes a Reverse Takeover under AIM Rules and is subject to shareholder approval, with completion planned for 24 February 2011.

Amco focuses on the rail, energy and engineering markets and provides an integrated service from feasibility, budget and design through to installation, commissioning and maintenance. The business underwent an MBO backed by private equity house Endless LLP in April 2008.
The transaction, which was originated by Deloitte, represents a substantial acquisition for Renew. Amco’s 2010 turnover is expected to be in excess of £75m, and the transaction is in line with Renew’s established strategy of growing its specialist engineering business. The acquisition of Amco will broaden and enhance the scale and range of services Renew provides across its specialist engineering businesses and is expected to be both margin and earnings enhancing.

In the year ended September 2010 Renew had turnover of £290.4m from activities concentrated in two business streams, Specialist Engineering and Specialist Building. Brian May, CEO of Renew, commented on the acquisition “We are delighted to welcome the staff and management of Amco to the Renew group. The acquisition of Amco allows Renew to increase and broaden the scale of its specialist engineering operations, as well as adding to the range of services we can provide to our customers. Amco has a strong and highly experienced management team and I look forward to working with them in the future.”

Since the 2008 MBO, Amco has grown both turnover and profit, increasing its focus on specialist engineering markets, in particular the higher growth energy market as well as building its position as one of the UK’s leading rail contractors. Amco has developed outstanding relationships with key clients including Network Rail, Magnox, E-on and the Environment Agency, often structured through long term framework agreements.

Darren Forshaw, Partner at Endless who led the deal, said “Amco is an outstanding business and has been a first class investment for Endless, I feel privileged to have been involved in the successes of the past three years. Since the MBO, annual profits have increased more than threefold and the business has expanded its activity across all of its key markets, this at a time when most of its peers have experienced declining turnover and profits.”

Aidan Robson, Investment Director at Endless added “The success of Amco recently is no surprise when you see the quality of the management team and the attention to customer service.  The business is well-positioned for future growth and Renew will be an ideal owner, providing the foundation and support to deliver the next phase of Amco’s development.”

Endless and management were advised by Martin Jenkins and Barry Jackson from Deloitte with Neil Thompson at Hill Dickinson providing legal advice. Barry Jackson from Deloitte said “We were tasked with finding the right buyer for this high quality business in what still remain challenging market conditions. The acquisition demonstrates that good quality deals are getting done and is another indicator that activity is gradually increasing in the M&A markets. The success of Amco since the buyout represents a great example of value creation through management and private equity working together and, having identified Renew as the ideal strategic acquirer of the business, it is great to see this deal announced.”

Renew was advised by Sandy Fraser and Sean Wyndham-Quin from Brewin Dolphin. DLA Piper was the legal adviser and KPMG performed the financial due diligence.

Sean Wyndham-Quin from Brewin Dolphin said “Throughout the recent recession, Renew’s specialist engineering business has continued to grow organically demonstrating the quality and resilience of the specialist sectors in which Renew operates. This acquisition is firmly in line with the group’s stated strategy and achieves the board’s objective of delivering in excess of 50% of group revenue from specialist engineering by 2012.”