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Deals of the Year 2018: Bidvest’s Noonan deal underlines value of 'cultural fit'    
The winning 'Deal of the Year' in the 'Mid Market M&A' category is Bidvest Group's €175 million acquisition of Noonan Services Group last August. A marriage very much of Investec's making, it highlights the value of strategic and cultural fit in building strong international companies.
Bidvest is a services, trading and distribution company and one of the largest corporates in South Africa. It is listed on the JSE, where it has a market capitalisation of approximately ZAR 80 billion (€5.4 billion). It employs some 113,000 people across seven divisions, generating annual revenues of about ZAR 70 billion (€4.7 billion). The acquired company, Noonan Services, is a market leader in Ireland in the provision of strategic outsourced services, with a growing presence in the UK. It employs over 13,000 people and achieved revenues of about €320 million in 2016.

Investec has had a strong relationship with both Bidvest and Noonan over many years. Investec’s Irish team advised on the sale of the Noonan business to Alchemy Partners in 2008 and subsequently acted for it in respect of three bolt-on acquisitions - Federal Security, RPS Engineering Services and Resource group in the UK.

Investec identified Bidvest as an ideal potential acquirer of Noonan, given the strategic and cultural fit between the two businesses, and introduced the idea to Bidvest. It also helped position Bidvest as a buyer well in advance of the sale process commencing and provided support across all elements of the transaction.

'This is a very exciting and ground-breaking acquisition for Bidvest,' said the company’s chief executive, Lindsay Ralphs. 'We have said that we intend pursuing a strategy of acquisitions that will provide geographic diversification for certain of our core businesses. This acquisition achieves that objective.'

Jonathan Simmons, director of Investec Corporate Finance, said the genesis of the deal went back to the unbundling of the original Bidvest Group in June 2016. Bidvest Food Services business had internationalised many years earlier and grown to be a top three foodservices provider globally. Following the unbundling, Bidvest Group, which contained all the remaining non-food services businesses, was intent on pursuing a similar international strategy through the largest of its seven divisions, Bidvest Services, comprising facilities management, security, travel and industrial services.

A number of regions were considered, he said, and given the many similarities that Ireland and the UK have with South Africa, including business practices, language and common law system, it was a natural part of the world for Bidvest to focus on.
Investec had also been particularly familiar with the Noonan business. 'As with any private equity-owned business, it was the intention that it would be sold at the appropriate time - in this case after at least one full year contribution from the transformational Resource acquisition. Conscious of this, Investec identified it as a good fit and, crucially, a meaningful platform to enable further growth for Bidvest.'

The sale process formally commenced in early 2017 and Bidvest concluded the acquisition in August.

'Investec worked hand in glove with the Bidvest team and their other advisers through the entire deal process advising on the commercial terms and managing all aspects of the transaction' Simmons said. 'Bidvest was an excellent counterparty for both Alchemy and the management vendors as they were an exceptionally strong and well capitalised trade buyer, understood the industry intimately and, for the Noonan management team going forward, had the strategy and capability to execute on same to enable Noonan Management to further grow their business. This is in contrast, for example, to an in-market or part in-market synergistic buyer.

'Culturally there was an excellent fit between Bidvest and Noonan which was very apparent early in the process. Few corporate transactions address all the strategic and other objectives of acquirers and vendors but the acquisition of Noonan by Bidvest was one where all material interests aligned,' Simmons said.

Keavy Ryan, Partner, A&L Goodbody said the transaction gave the Irish-based company an exciting platform on which to build, allowing for further expansion and development and that its business model and geographic presence complement Bidvest’s Services division.

Advisers on the deal were: Investec Bank plc; Robert W. Baird, MacFarlanes, A&L Goodbody (sell-side); Baker MacKenzie (buy-side); KPMG (vendor DD); and Deloitte (buy-side DD).

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