Eyes on the prize: APEM secures £50m+ funding

Headquartered in Stockport, Greater Manchester, with 600 employees working across 14 offices in the UK, Europe and the US, APEM is an environmental and geospatial consultancy, with specialisms in renewable energy and water resources. With these selling points to the power, water, renewables and infrastructure sectors, the 35-year-old company has seen rapid growth since the 2019 management buy-out backed by mid-market private equity house WestBridge. And the £50m+ debt package secured in June will help fund a growth strategy, with M&A playing its part.

Peter Barkley, a partner at WestBridge, explains that the company was originally attracted to “the globally renowned expertise within the business, operating in what we thought were very high-growth, high-quality markets with significant potential”.

“We’ve invested heavily in additional management capacity,” Barkley says, “helping to build a team, finance and HR functions and IT systems, putting in place the building blocks to allow the business to scale rapidly. And it has done that on an organic basis: typically in the 40% per annum revenue level. And then, once we had achieved that, after about 18 to 24 months, we felt there was a platform that was ready to selectively obtain highly specialist, complementary acquisitions.”

Some of those were sourced by Gregg Pendlington, from DSW Corporate Finance in the northwest of England. APEM wanted advice on conducting a buy-and-build strategy.

“Buy-and-build plans don’t come easily,” says Pendlington. “You set out your segments, you set out your targets, you talk about that and you rank them, and then you go and speak to them. And now we find ourselves three years later, having done four acquisitions with more in the pipeline.”

Debt instrument

To tap into that pipeline, in June 2023 APEM secured the £50m debt package through alternative asset management group Tikehau Capital. This came alongside additional debt capacity through an accordion facility through the global investment group, as well as an additional £7.5m working capital facility with Virgin Money.

The funding, says Tom Barnwell of Clearwater International, who advised on the transaction, had the purpose of refinancing existing debt within APEM and also to make acquisitions, including the contemporaneous June takeover of Dublin-based consultancy Macro Works.

“Tikehau isn’t a bank,” explains Barnwell. “It provides capital in the form of debt, but it’s unable to provide bank accounts or make payments. The working capital facility Virgin Money provided is linked to being a day-to-day bank, but it’s also to provide the working capital that might be needed attached to specific contracts or invoices if they’re paid before or after your payment runs. It’s fairly typical within the unitranche funding structure – Tikehau provides the unitranche, Virgin Money provides the revolving credit facility.”

As for the ‘accordion’ section of the debt, Barnwell explains that “you can take a commitment from funding and anything that’s above that commitment is what’s called an accordion. You can also refer to it as an uncommitted acquisition facility.”

Access to debt markets in the current economy can depend on the quality of business and sector, according to Barkley. “The interest that Tom and his team were able to generate is testament to the quality of the asset.” Barnwell says that while raising debt in the current market, “you have to be really well prepared and able to pre-empt as many of the funder questions as you can. In a high-growth sector with a quality business, there is still debt appetite there. Are the terms exactly what we would have got to more than 18 months ago? No, but they weren’t far off it.”

Board refresher

The package, says Barnwell, is “suitable for the next stage of growth and the stage of growth after that”. So, what will that look like? After more than 20 years at APEM, first as senior scientist, then as managing director and latterly as CEO, Dr Adrian Williams is moving to an executive director role, with his place taken by former chief strategy officer Leah McGimpsey. Williams says McGimpsey “has developed and launched the group’s five-year growth strategy and delivered an M&A pipeline of global opportunities”.

McGimpsey, an ACA, cut her teeth in corporate finance and M&A at Deloitte in Vancouver and London, and organic growth remains at the forefront. However, M&A is and continues to be a key part of APEM’s strategy. At the time of the growth financing, she said that “alongside strategic acquisitions, we are committed to maintaining sustainable organic growth by nurturing existing relationships and expanding our offerings into new regions. Tikehau Capital reinforces that and brings synergistic values to support our aspirations.”

The leadership changes are part of the long-term plan developed in partnership between management and WestBridge to deliver a leadership team appropriate for the size of the business today and one that’s capable of delivering on their ambitions for growth. McGimpsey’s promotion to CEO was the final step in what has been a 12-18-month journey.

Her previous role did include responsibility for M&A, but she also took on responsibility for the overall strategic direction of the group. Barkley says: “The step to CEO was therefore a natural one. She has developed a strong relationship with WestBridge since joining and we played a key part in the selection and appointment process, as did Adrian and the management team.”

Organic growth

Williams says APEM works on “lifetime projects with the sole aim of helping the planet we live on.” Clients include governments and blue-chip companies, and the firm’s office footprint has expanded to include the US, Germany and Australia.

“The markets we’re operating in are growing significantly,” says Barkley. “We probably had our first conversation about acquisitions and being acquisition-ready at board meeting one. The business we talked about in that meeting we did acquire, but it took us a while to get those vendors to the table.

“We built a long list of acquisition targets, but we’ve been very selective, to ensure that there’s a fit with each of the acquisitions. We’re bringing in like-minded individuals and retaining that high science and quality focus.”

He adds that: “There are instances where a business has grown rapidly from the first time that we’ve spoken to it to the point we actually acquire it, but that’s a positive thing, that we’re buying like-minded high-growth businesses. The organic growth of APEM has allowed us to achieve that through debt rather than further equity. In terms of capital structure, the group is still modestly leveraged.”

As a PE investor, Barkley is delighted with a business whose revenues and EBITDA (£10m and £2m at the time of the 2019 MBO) have risen six-fold on WestBridge’s watch. Future expansion will encompass geography, the range of services offered, and the technological ability to provide those services. Barkley says that they look at acquisitions “from a global perspective, and then, with the help of Gregg, narrow things down”.

With Barkley estimating that 70% of the growth has been organic and 30% through M&A, he says: “We’re delighted with the investment performance to date, and long may that continue.” Barkley describes the process of building the underlying business as “getting the foundations right” before embarking on dedicated M&A.