Buy and build – a formula for growth in Northern Ireland
FOLLOWING an exceptionally buoyant level of merger and acquisition activity in Northern Ireland in 2021, it is no surprise that this momentum has continued into this year already.
Indeed, despite recently navigating both the pandemic and uniquely challenging Brexit implications, the region is showing its renowned resilience and emerging stronger than ever.
According to the ONS, Northern Ireland’s economy has so far enjoyed the best recovery from Covid-19 of any area in the UK, while our current market position, with dual access to the EU and the UK, promises a bright future for our best and bravest entrepreneurial companies.
With this, we will undoubtedly see increased levels of deal activity, not only in terms of putting Northern Ireland businesses in the acquisition driving seat, but also presenting opportunities for local vendors to attract buyers from across the UK and beyond at strong valuations. By necessity, this will require the ongoing support of the local funding ecosystem.
As the UK and Ireland’s most active investor, BGF provides growth capital to help companies realise their growth potential, and over the last 10 years has invested £3 billion in over 460 companies, including over £50 million in Northern Ireland.
For many of our investee companies, acquisitions form a key limb of their growth strategy. Known as “Buy and Build”, this Lego-brick approach to expansion offers an effective way of bolstering market position and achieving scale in a comparatively short time frame.
It is a well-trailed path and will often mean partnering with an experienced, patient funder, such as BGF, who can support the challenges that can come with executing and integrating acquisitions, tap into its UK-wide network to open up acquisition opportunities, and also, fundamentally, have deep-pockets available.
On the other side of the fence, we have also witnessed first-hand the benefit to a vendor in selling to a business backed by an institutional growth capital investor; whereby the experience of acquiring and a ‘safe pair of hands’ means a transaction is more likely to be completed.
The recent acquisition of Belfast-based e-commerce business, Made to Engage, by UNRVLD, an award-winning digital agency group backed by BGF in April 2020, is a good example of how a well-managed buy and build strategy, bolstered by robust growth capital, can also successfully fuel M&A activity between UK regions, drive economic growth locally and add value to the vendor business.
In partnering with BGF, UNRVLD gained access to BGF’s network and insights from the digital sector, which enabled it to identify the gaps in its offering and, supported by an experienced investor team, design an effective buy and build growth plan.
Acquiring Made to Engage allowed UNRVLD to add additional skillsets to its team, expand its client base, offer new services and crucially widen its European reach (thanks to Made to Engage having offices in Belfast, Dublin and Amsterdam).
Similarly, being acquired by a bigger player has allowed Made to Engage to take on more ambitious projects for clients and gain a stronger foothold internationally.
Another example of a buy and build strategy born in Northern Ireland is Lisburn-based Mzuri Group, known locally as Decora Blinds. A BGF investment of £10 million in 2020 helped to support expansion into the US and European market through the acquisition of five companies, followed by the acquisition of the TCMM Shutter Group, one of the UK’s largest interior wood shutter distributors, in 2021.
Done well, buy and build is a win-win for both parties. It more often than not injects a new energy, pace and focus into the vendor, and provides the acquirer with instant scale. With a favourable market backdrop within Northern Ireland, the time has arguably never been better for local business to embark on an acquisition-led growth strategy.
:: Chris Nixon is an investor at BGF