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Markross121_ May 8, 2019 No Comments

Rentokil set to continue acquisition spree while organic growth continues

Pest control expert Rentokil Initial said this morning it is planning to continue an acquisition-heavy strategy and is likely to spend between £200m and £250m on takeovers this year.

The firm showed 4.9 per cent growth from takeovers in the first three months of the year, while organic revenue grew at four per cent.It signed eight deals in the quarter – four in pest control and four in its hygiene business sectors – adding combined revenues of around £29m.

“We are encouraged about our prospects for further mergers and acquisitions this year and our pipeline of value-enhancing opportunities is strong,” the company said in a statement to shareholders this morning.

Revenue in the firm’s pest control segment grew 12 per cent including acquisitions but subtracting disposals or closed businesses. Hygiene, meanwhile, rose 7.2 per cent, while the protect and enhance market stayed in line with the first quarter of 2018.

“We have had a good start to 2019 and I’m pleased with our performance in the first three months of this year. I am confident of another year of successful growth for the company, in line with market expectations,” said chief executive Andy Ransom.

Shares were up around 1.3 per cent this morning to 373p.

Last week Rentokil was told it might face an investigation from the Competition and Markets Authority (CMA) over its takeover of Mitie’s pest control arm late last year.

The firm has been given until 23 April to tell the CMA how it will ensure that competition is not severely reduced by the acquisition.

It said last week that the acquisition was small and in line with its strategy to buy “high quality pest control businesses in growth and emerging markets.”

Brewery openings stall as multinationals move in

A boom in new brewery sites has slowed down dramatically in the last 12 months as multinational firms muscle in on the growing demand for craft beer.

Growing competition from large businesses has hindered smaller brewers from setting up new outlets, causing the growth in openings to hit a five-year low.

The total number of breweries increased by just eight in 2018, marking a sharp slowdown from 390 openings in the previous year.

According to accountancy firm UHY Hacker Young, which produced the data, the craft beer market has become difficult for new entrants as “multinational brewers continue to buy and invest the more successful craft breweries.”

Among the high profile mergers and acquisitions involving multinational businesses in the craft beer sector is the Fullers deal for Dark Star, a craft beer business in West Sussex, and Heineken’s acquisition of stakes in Beavertown Brewery, Lagunitas and Brixton Brewery.”We’re not saying that the market is shrinking just the number of players is consolidating and sales growth is going to be harder to come buy,” said James Simmonds, partner at UHY Hacker Young.

He added: “Craft breweries need to ensure their business model is s sustainable and profitable at an earlier stage and not just rely on the idea they’ll constantly be able to grow their way out of trouble.”

The total number of UK breweries reached 2,274 at the end of 2018, rising from 1,352 five years ago.

Dr Pepper Snapple merges with Keurig Green Mountain

US soft drink maker Dr Pepper Snapple is to merge with coffee company Keurig Green Mountain to form Keurig Dr Pepper.

The new beverage giant will bring together well-known brands such as Dr Pepper, Orangina, Schweppes and Sunkist with Green Mountain Coffee Roasters.

Keurig Dr Pepper will have a combined annual revenue of $11bn (£7.8bn).

Under the terms of the agreement, Dr Pepper Snapple shareholders will retain 13% of the combined company.

Dr Pepper Snapple shareholders will also receive $103.75 per share in a special cash dividend.

The firms said that the merger would enable Keurig Dr Pepper to have “unrivalled distribution capability to reach virtually every point-of-sale in North America”.

UK digital advertising spend to grow to £15bn in 2019

Spending on digital advertising in the UK is set to grow to more than £15bn this year amid a boom in new digital marketing technology, a new report has revealed.

Digital ad spend will enjoy double-digit growth in 2019 as the industry moves away from traditional media forms, according to the latest forecasts by Barclays Corporate Banking.

The optimistic figures come amid an ongoing shift to digital in the sector, with out-of-home (OHH) advertising earmarked as a key area for transformation after digital OOH surpassed traditional outdoor for the first time last year.

Agencies have been grappling with disruption in the industry, with ad giant WPP undergoing a radical transformation plan in a bid to simplify its complex structure.

Despite concerns about sweeping changes across the industry, the report stated optimism remains high, while appetite for mergers and acquisitions remains buoyant.

Sean Duffy, head of TMT at Barclays Corporate Banking, said: “It feels like adtech is slightly pushed to the sidelines, which is a mistake as it is transforming advertising and can be another real growth engine for the UK economy.

“Adtech is already helping UK businesses compete on the global stage and will continue to allow brands to market themselves more effectively as further technology advances are harnessed.”

Advent eyes $1B fund as PE continues its push into tech

Advent International has launched its first tech-focused vehicle with a target of $1 billion, according to Buyouts, becoming the latest major private equity firm to indicate an increasing appetite for tech deals.

The news comes about seven weeks after Bryan Taylor joined Advent as a managing partner and leader of the firm’s tech investment team. Taylor’s hiring coincided with the opening of a new office in the Bay Area, part of what an Advent press release at the time described as the firm “deepening its commitment to the technology sector.” Most recently, Taylor was the co-head of the tech group at TPG Capital, where he helped lead a team of 20; Advent’s tech group currently has more than a dozen employees across North America and Europe.

Reports of the debut tech vehicle also come as Advent is in the midst of another major fundraising effort. Public LP documents from earlier this month showed the firm has begun gathering commitments for its ninth flagship buyout fund, which reports from last autumn indicated could target at least $13 billion. That would equal the sum Advent raised for its prior flagship fund, which hit a $13 billion hard cap in 2016.

Earlier this week, another private equity investor formed a new fund focused on the tech space, albeit a very specific slice of it: Caisse de dépôt et placement du Québec unveiled its CDPQ-AI Fund, a $250 million pool that will be put to use backing companies from Québec with “a proven track record in artificial intelligence.”

Across the entire private equity landscape, firms are raising more cash for tech investments. At the end of January, buyout giant The Carlyle Group closed its latest European tech fund—which will also be deployed in the US—on €1.35 billion (about $1.5 billion), a serious increase from a 2015 predecessor that brought in €656.5 million. Carlyle’s close came a mere two days after Thoma Bravo, a longtime specialist in the tech space, wrapped up a $12.6 billion mega-fund, one of the largest vehicles ever that will mainly target tech companies.

In each of the past four years, there has been an increase in the percentage of overall PE investments in the US and Europe taking place in the IT space. During 2019, though, the numbers are full-on booming. More than 22% of completed deals so far this year have been in IT, per the PitchBook Platform, a major jump from last year’s 18% rate and a whole different universe from the 13% clip logged as recently as 2015. For years, the B2C space ranked second only to B2B in drawing the most PE deals; now, it seems IT has clearly overtaken B2C as the No. 2 choice.

And while Advent may be among those contributing to that change, tech deals are far from the Boston-based firm’s only focus. In March alone, Advent has been linked to a dizzying array of potential billion-dollar deals. The firm agreed to buy German chemicals company Evonik for €3 billion, while a potential €1.8 billion buyout of Italian debt provider Cerved fell apart after news of ongoing negotiations leaked to the press. Advent has also been among a host of firms named as possible buyers in a handful of very expensive auctions, including ongoing sale processes for Bayer‘s animal health unit, the skin health unit of Nestlé, and Kantar, a data analysis business owned by WPP.

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