TICC Preview: Focus on regulation, health and safety drives M&A

06 January 2021

This is an overview of Mergermarket proprietary intelligence in the TICC space over the last three months, featuring existing opportunities in the market.

Dealmaking in the testing, inspection, certification and compliance (TICC) sector is thriving, driven largely by a growing demand for regulation and compliance in global trade and an increasingly strong focus on health and safety. 


The TICC market, spanning a broad range of services from food certification and drug trialling to fire safety, education and construction, is forecast to reach USD 267.4bn in 2024, according to a report by ResearchAndMarkets.com.  


The regulation and standardisation of goods across global supply chains play an increasingly important role in trade, which has helped to buoy the sector despite the impact of COVID-19, according to Mark Silver, Chairman of a number of PE-owned businesses including TICC firms CET and SGI Compliance


“Food testing is becoming increasingly attractive with concerns around GM and the importance of traceability in international supply chains … people want to know where their food is coming from,” he said. 


With its high margins, strong growth and recurring revenues, the fragmented TICC sector is “perfect for buy-and-build strategy,” making it attractive for investors to deploy more capital, although rising valuations for smaller players has reduced the scope for multiple arbitrage, according to Mark Maunsell, Business Services Director at Clearwater. 


“TICC is a private equity paradise” with buyout firms attracted to the defensive characteristics of a sector rooted in legislation and regulation, Silver said.


Trinity Consultants, a US environmental consulting firm backed by Levine Leichtman Capital Partners, today (6 January) acquired AWN Consulting, an Irish environmental and risk management firm with revenues of reportedly around USD 39.2m


Other recent deals include PE firm Portobello Capital‘s acquisition of a 35% stake in Spain-based technology and laboratory services company AGQ Labs, for around EUR 50m (USD 56.6m) in July, valuing the Spanish TICC company at up to EUR 150m, as reported.


Among deals in the pipeline attracting PE attention is French TICC firm Apave Group, which has mandated Cannacord Genuity to explore a sale of a minority stake in the business that could fetch EUR 250m, as reported by this news service in November. Cinven and Eurazeo are among PE firms expressing interest in the asset, as reported.


Major TICC players have also been engaged in dealmaking in recent months, most notably with the acquisition of SYNLAB Analytics and Services, the services arm of German laboratory testing company SYNLAB, by Swiss TICC firm SGS  for around EUR 550m in November. 


Also in November, Dutch testing services provider Normec Group acquired Organic Waste Systems, a Belgian waste management firm with revenues of around EUR 25m.


Divestments and spinoffs by large TICC firms will continue to drive dealmaking in the space as major players such as SGS, French firm Bureau Veritas and German vehicle inspection services provider DEKRA attempt to clean up portfolios, according to Maunsell. “Companies were streamlining their portfolios before COVID hit. If anything, the crisis has accelerated this trend,” he said. 


Mid-sized players seeking consolidation through acquisitions include French inspection services provider Socotec and Eurazeo-backed vehicle testing firm UTAC CERAM, Normec Group and LDC-owned SGI Compliance. 


Further consolidation in the already-growing sector is expected to thrive following the COVID-19 crisis fallout, according to Maunsell.


“A winning strategy in the sector is widely considered to be one that involves increased specialisation and dominance of specific verticals rather than growing breadth and diversification,” he said, referring to Socotec and Dutch TICC firm KIWA as examples of companies that have developed market leading positions in the infrastructure sectors. 


And despite the challenges it has caused, the global crisis could actually help spur long-term demand in the sector through initiatives set up by TICC players to promote a safe working environment.


“New TICC services aimed at workplace accreditations could last for a long time beyond COVID-19, perhaps indefinitely. Intertek’s Protek, the UK-based e-learning training and assessment programme for COVID-19 protocols in the workplace could see good demand, whilst Bureau Veritas has partnered with Accor  to launch a certification scheme in the hospitality and restaurant industry,” Maunsell said. 


Proprietary intelligence 


Antares Vision (22/12/2020) 

Antares Vision , an Italian digital inspection and track-and-trace systems developer, intends to complete new acquisitions in 1Q21 as it has postponed its MTA or STAR stock exchange migration , CEO and founder Emilio Zorzella said. The company has continued scouting for potential takeover candidates while completing the takeover of US-based Applied Vision. It could hire advisors depending on the kind of targets and the geographies it selects. In 2019, Antares posted EUR 149.5m turnover (+28.7% year-on-year) with EUR 36m EBITDA (+22.7% y-o-y). It generated EUR 25.3m (+27.9%) net profit. 


UTAC CERAM (18/12/2020)

UTAC CERAM, a vehicle testing and certification services provider, is on the lookout for bolt-on acquisitions and aims to cut two to three deals by end-2021, CEO Laurent Benoit said. Acquisitions will enhance the French company’s technological offering and support further expansion in key regions such as Germany, China and the US. UTAC CERAM is aided in its search by an in-house M&A team and should soon onboard KPMG for advisory support but welcomes approaches from advisors with target suggestions. With subsidiaries in Europe, China, Russia, the US and Japan, the company recorded FY19 revenues of EUR 83m. 


Formel D (14/12/2020)

Formel D, a Germany-based automotive-industry quality management services provider, is looking to beef up its digital expertise through acquisitions, a company spokesperson said. The company, which is owned by 3i Group [LON:III] and CITIC Capital , wants to hear from potential targets operating in virtual testing and digitalisation and is looking at geographies including Germany. It will hire due diligence providers to assess its future deals. The company generated EUR 363m revenue in 2019.


Normec Group (25/11/2020)

Astorg-owned testing services provider Normec Group is seeking bolt-on acquisitions and aims to cut two to three deals by the end of 1Q21, CFO and co-founder Marco Zomer said. The Netherlands-based firm is seeking add-ons for its core segments, life safety, environment, and food care. Normec welcomes approaches from financial advisors. Geography is a crucial factor in the firm’s M&A drive as it hones its target search in the Benelux, Germany, France and the Baltics – a “perfect fit” for acquisitions. Acquisitions will add value to Normec’s existing portfolio, boost its client offering and help the firm reach its goal of doubling 2019 revenue by 2022.


Adler and Allan (20/11/2020)

Adler and Allan Group, a UK-based environmental risk reduction services provider, is screening the market for bolt-on acquisitions as it looks to engage in market consolidation under new owner Sun European Partners, Paul Daccus, MD at the sponsor, said. The company plans to make up to five acquisitions per year in a bid to snap up smaller peers and expand its offering within its core areas of risk compliance and monitoring, fluid containment and spill response. Potential targets will most likely have EBITDA below GBP 5m, as the UK environment risk management market remains highly fragmented. 


Socotec (18/11/2020)

Socotec, a French inspection services provider, is planning to continue its aggressive buy-and-build strategy to reach annual revenues of EUR 1.4bn by 2024, CEO Herve Montjotin said. Targets include companies operating in the building and infrastructure sectors to enhance its value proposition for customers that seek a partner for the lifecycle of an asset. Infrastructure targets in France are of interest and geography will be  critical as it looks to expand its footprint in Germany, Morocco, Luxembourg, and other countries. The company generated annual revenues of EUR 900m in 2019, up from EUR 500m in 2016. If the COVID-19 pandemic had not happened, it would have broken the EUR 1bn annual revenue mark.


Triskelion and NMi Certin (04/11/2020)  

Levine Leichtman Capital Partners (LLCP), a California, US-headquartered PE firm, will pursue international buy-and-build strategies for Triskelion and NMi Certin, head of European fund investments at LLCP John O’Neill said. Both Netherlands-based companies are targeting international expansion as a key area for growthusing a typical M&A playbook for TICC businesses. LLCP acquired both the business from First Dutch Innovations last month and capitalised the deals separately. Triskelion is a testing and safety specialist for the food, pharmaceuticals and chemicals industries, and NMi provides legal metrology testing and inspection services. NMi makes around EUR 4m EBITDA and Triskelion EUR 7m EBITDA.


SGI Compliance (29/10/2020) 

LDC-backed SGI Compliance, a risk and compliance services provider, is eyeing bolt-on acquisitions in the fragmented TIC market, CEO Antony Chant said. The company envisages cutting two to three deals per year and welcomes approaches from financial advisors with target suggestions. Companies with revenues between EUR 5m and EUR 10m and 50 to 100 staff are SGI’s sweet spot, although more sizeable opportunities will also be considered. Acquisitions will provide buy-and-build opportunities so targets should be of “reasonable scale” and allow SGI to extract value as well as being manageable in terms of integration. While “healthy” companies are preferred, SGI also considers distressed opportunities.

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