Safe supply

What is the deal?

The sale of Supply Plus to Lagercrantz, a Stockholm-listed buy-and-build consolidator of high-quality manufacturing businesses, which has around 70 subsidiaries and operations, primarily in northern Europe, as well as in the US and China. Cambridgeshire-based Supply Plus designs, manufactures and distributes safety and fuel delivery equipment to emergency services. Its turnover in 2022 was £7.3m and it employed 67 people, with its products sold in more than 40 countries. The four shareholders – CEO Derek Gotts, FD Michael Corbishley, plus the head of operations and head of HR – completed an MBO in 2019. By 2022, they decided to realise value from the business.

How were you introduced to the deal?

A beauty parade of London-based advisers had been completed and the shareholders were close to making an appointment. However, the daughter of one of the shareholders was a regional corporate lawyer we had worked with previously and she suggested the shareholders meet us, given our East Anglia presence and relevant sector credentials. Our partner Philip Olagunju led our deal team’s pitch, and we were given the corporate finance mandate to advise on the sale.

What were the timescales?

We were appointed in June 2022 to advise on valuation, deal structuring and process management, and negotiate with potential acquirers. It completed 12 months later. We spent about three months collating information, drafting the memorandum, completing buyers’ research and reviewing that research with the vendors. We had to think through our approach to those buyers Supply Plus had a close relationship with. The business attracted interest from UK and overseas, trade and private equity. It was clear from our first discussions with Lagercrantz – which they didn’t know before the process, but Philip introduced them – that the two businesses shared the same strategic and cultural vision.

What was the deal structure?

On completion 80% of the company’s equity was acquired. Two shareholders fully exited and the remaining two retained 20%. Derek stayed as CEO. A put-and-call option for the purchase of the remaining 20% within two years of completion was part of the deal. Lagercrantz funded the acquisition entirely with cash from its balance sheet.

Who were the other advisers?

Sell-side legal advisers were Marriott Harrison. Lagercrantz is an experienced acquirer and carried out the due diligence in-house with legal support from DLA Piper.

What were the challenges?

The most difficult challenge was the market. Supply Plus is a leader in fire safety equipment working with more than 90% of the UK fire services, and with a strong international footprint. The wider market was coming out of the global pandemic, and there were supply chain issues for big truck manufacturers, which buy the equipment for fire services’ trucks. This was considered a risk by the buyer during diligence, but Supply Plus’s very strong forward order book and the buyer’s detailed commercial due diligence overcame the issue. 

And lessons learned?

The deal was delayed by the last-minute need to obtain the necessary National Security and Investment Act clearance. Initially, we all agreed the deal wouldn’t require clearance, but there was a last-minute decision to err on the side of caution. There was no issue with clearance, but it’s best to do it early – we didn’t want the transaction unwound in a few years if the government were to revisit it.