What was the deal?

The sale of Artic Building Services to Rockpool Investments-backed Mecsia, a fast-growing mechanical and electrical maintenance group. Artic’s customer base is primarily in the healthcare, education and commercial property markets and complemented the existing Mecsia Group’s business, geographic spread and culture perfectly. Rockpool provided equity, alongside further finance from Mecsia’s incumbent lender, Virgin Money, to fund the deal. Mecsia had already made three recent acquisitions and adding Artic would take the turnover of the Mecsia Group to more than £100m. The deal completed in July 2023.

How were you introduced to the deal?

Simon Wilson, partner and a corporate lawyer at Spencer West, originally introduced me to Artic in 2021. I had just completed on the sale of a very similar-sized business in the facilities management sector, so suggested that the owner of Artic speak to that business. That previous transaction went perfectly and they were very complimentary, which helped secure the sale mandate. 

What were the key considerations?

Artic’s founder/shareholder, Vincent McAnallen, alongside the joint MDs, Colin Trowell and Paul Lucas, wanted the buyer to embrace the culture and build on the reputation Artic had built over the years. There are some very big players in the market and it was likely that the culture of the business would be swallowed up and lost if Artic was sold to one of them. Colin and Paul were seeking to continue in their existing roles, so it was imperative that the right buyer was found.

Who were the other advisers?

Menzies provided corporate finance and tax advice to Artic, while Spencer West was the legal adviser. PKF Corporate Finance carried out financial and tax due diligence for Rockpool and Mecsia, and Taylor Wessing provided legal advice. For Rockpool, Tom Coey and Simon Collins led the deal, and Virgin Money received legal advice from CMS Law. 

What were the challenges?

Vincent had a specific price/enterprise value in mind and wanted to receive the free cash. He also wanted to sell his shares with no contingent tie-ins. The shortlist had a dozen or so potential buyers. A competitive bidding situation got the price up to the desired valuation and, with two potential buyers still at the table, we eventually agreed terms with Mecsia. 

Free cash and net working capital had to be agreed with the buyer’s advisers before due diligence got underway to ensure the founders target equity value would be met. A share option scheme was not straightforward and a great deal of work, supported by the Menzies corporate tax team, was required to get a deal structure that worked for all parties.

Often you see business owners take their eye off the ball during the transaction and the business performance suffers, but with Artic the opposite happened. With Paul Lucas focused on keeping the operations running smoothly, and Colin Trowell handling the lengthy and complex due diligence, the business actually grew quite considerably. 

A hard stance was taken by the sellers towards a number of terms in the sale and purchase agreement, so the improved profitability helped tremendously when it came to negotiating the legals.