Our Strategy
The aim of our acquisition strategy is to:
Our Approach
Our approach is not a one size fits all but in general we look to buy good businesses. It is important that we acquire companies with the following characteristics:
Leading Management Team: as we seek to retain the management team, it is critical that we are able to work together. We therefore look for companies with management teams that can inspire the next generation of leaders.
Stable: an ability to deliver reliable and stable revenue streams and can demonstrate strong financial management, margins and cash flow.
Niche: one of the corner stones of our success is that we offer a service with a high barrier to entry. This is what we look for in any company we acquire.
Cultural: this needs to be broadly aligned with our own. We are a very diverse team and a company that embraces our diversity with everyone sharing a common goal: to provide outstanding customer-based solutions. Munnelly Group is a diverse, fun and relaxed place to work and it is important that any company who joins our group shares this approach.
Sharing: we seek to maximise synergies by coordinating common functions, sharing best practice and implementing commercial and financial controls.
Our Valuation
Our approach to valuations is not based on a formulaic multiple of earnings or turnover albeit we appreciate our offer can be translated back into these “conventional yardsticks”.
Instead we take an overall view of the business of the Company, listen carefully to you during our meetings, as well as digesting the market conditions, market position as well as the data that is provided to us.
We place a large emphasis on the historic financial performance of target businesses. While future growth is always a plus, we are more interested in understanding the extent to which status quo trading can be maintained so our valuation principles are based along the following lines:
Recurring Revenue
Recurring Revenue
The strength of recurring revenue which is delivered under contract. In other words, how stable is the on-going trade and how much repeat business happens each year. The higher the recurring revenue the better
Uniqueness
Uniqueness
The uniqueness of a product and service and the strength of the competitive landscape. Businesses that operate within a highly defensible niche with few direct competitors will command a higher valuation.
Cost Savings
Cost Savings
Whether any cost savings will be realised as part of the Munnelly Group. We have no interest in slashing costs but if there are obvious areas of duplication, naturally we will aim to become more efficient.
Cross-Sell Potential
Cross-Sell Potential
The extent of any cross-sell/up-sell potential. Businesses that can leverage our existing Group resources and are likely to grow as a result of acquisition will command a higher valuation.
Longevity
Longevity
The longevity of a product or service and the chance of the business maintaining its trading profile going forwards. The “better mousetrap” business will always command a lower valuation.
Our Reputation
Munnelly Group has acquired many businesses over the last few years. As a market leader in our field with a strong reliable reputation, it is important that we preserve our reputation in everything we do. Unlike other buyers:
- We Won’t Price Chip: the offer we make to you will be the price we pay. We do not operate on a basis of offering a high price and then seeking to reduce this during due diligence. More often than not we will have undertaken a lot of due diligence and assessment before we make an offer for any company. This means the price we offer will be the price we pay.
- We Are Not Hostile: we won’t engage in hostile / aggressive takeovers. We want existing management teams to work with us and not feel forced into any position.
- We Won’t Fix It: we have no appetite to acquire distressed or failing businesses. Our management team are busy delivering award winning services to our customers. We have no appetite to turn a business around and seek to make it work.
- We Want You: some owner managers are under the impression they can only “sell up” when they are going to retire. We would always prefer that the existing management continue running the day-to-day operations of any company we acquire. Furthermore, we hope that people who join our Group via acquisition stay with us and enjoy their time in our Group.
Our Criteria
In line with the Group’s objectives above, the key characteristics we are looking for within prospective target businesses are:
Specialist service-based operations;
Recurring work streams / repeat business in infrastructure-based environments with a proportion of underpinned revenue through long term contracts i.e. strong earnings visibility;
Regulatory/legislative drivers or other factors resulting in high barriers to entry;
Blue chip customers (ideally first-tier, or working in partnership with first-tier contractors) that we will perhaps already be working for e.g. infrastructure owners i.e. utilities, local authorities, rail, ports and waterways, nuclear, etc.;
A market leadership position is preferred as well as the potential to achieve nationwide coverage through organic growth and bolt on acquisitions being possible;
Technological advantage (compared with competitors);
Strong margin potential (minimum 5% EBITDA);
Sustainable markets.
