Deals
The Innovation Group plc Acquires Ingleby Ltd
The Innovation Group plc (LSE: TIG.L), a global provider of business process services and software solutions to the insurance, fleet, motor and property industries, is pleased to announce the acquisition of Ingleby (1879) Limited, the holding company of EMaC Limited ("EMaC") (the "Acquisition"), one of the UK's leading motor service plan specialists.
Terms of the Acquisition
The Group has today acquired the whole of the issued share capital of EMaC Limited from its shareholders including the CEO Angela Barrow and Mobeus Equity Partners. The aggregate consideration, payable in cash on completion, was £36.0m. In addition, a further payment of up to £10.0m is payable in cash in early 2017 based on a stretching profit target for the calendar year to 31 December 2016. This is dependent upon profit growth both in the UK and also across Europe.
Founded in 2004, EMaC is the UK's leading outsourced provider and administrator of service plans for motor vehicles and is the only company solely focused on the provision of service plans for the retail motor industry in the UK and Eire. It provides motor retailers with a key tool to achieve customer retention rates in the face of increasing competition in the motor industry, by working together to deliver service plans to vehicle owners through user-friendly web-based technology.
EMaC counts some of the motor industry's most recognised manufacturers as its customers, as well as some of the UK's largest car dealership brands. EMaC has sold 1.5 million service plans since inception, with 300,000 plans sold in the last financial year. Angela Barrow, the CEO of EMaC, has committed to remaining with the business for a minimum period of 2 years post acquisition.
Strategic Context
TheAcquisition provides the Group with an excellent platform upon which to pursue the wider geographical expansion of not just the administration of motor service plans but also of motor warranties. This is an area in which the Group has significant experience, having operated in this market for many years through its South African business. The UK motor retail market is experiencing positive growth, and much of the wider EU market has the potential to follow this trend. The Group intends to target this expansion initially at partners and customers in European markets with a longer-term aim of developing the EMaC product set in to an internationally successful Warranty and Service & Maintenance business.
TheAcquisition also increases the Group's scale and position in the UK marketplace. EMaC is an ambitious, customer-centric business with a distinctive brand profile which will help to enhance the Group's already successful reputation in the UK Motor space. EMaC also opens the Group up to a new segment of the market which it does not currently serve in the UK: motor service plans. The uptake of service plans is still in its infancy compared to the maturity of the vehicle retail market as a whole. The number of vehicle owners taking out a service plan continues to grow year on year, due to increased customer awareness and motor retailer enthusiasm. Through the acquisition of EMaC the Group will be able to offer an additional and compelling suite of services.
Financial information
EMaC's operating model, like that of the Group, is cash generative, enjoys low working capital requirements and is able to convert a significant portion of EBITDA directly to cash.
For the year ended 31 December 2013, EMaC reported £7.4m of revenue, £1.4m profit after tax (after deducting £1.1m of interest and other costs relating to shareholder and bank debt), £2.9m EBITDA and £35m of gross assets. EMaC's own forecast EBITDA for the year ending 31 December 2014 is £3.5m.The acquisition is earnings enhancing from completion.
Revolving Credit Facility
The Group increased its revolving credit facility with Barclays Bank from £30.0m to £50.0m on 30 September and extended its availability until 30 September 2019. The acquisition has been funded from a combination of this facility and from the Group's existing cash resources.
Commenting on the news Andy Roberts, Chief Executive Officer of Innovation Group said:
"We are delighted to welcome the EMaC team to The Innovation Group. We have always stated our ambition to build out the motor service plan offering across our Group and we have taken the time, energy and effort to make sure we find the right fit for this need. It is clear that EMaC will make an excellent addition to our Group - not only in terms of the service and scale that it brings but also in the culture and ethos of its people. Together we have big plans for growth in Motor - not just here in the UK but internationally where the opportunity is large and within our reach."
Angela Barrow, CEO of EMaC said:
"This latest chapter in the EMaC story is a very exciting one, which will support our aims to broaden our proposition and move into new markets. The EMaC brand will continue to be an active part of the UK motor retailing landscape and all of our customers can be assured that they will continue to benefit from our distinctive service led ethos. I am excited to join the Innovation Group and will use this change to accelerate our development plans."
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