Inflexion pays premium price to acquire part of Marlowe PLC

AIM-listed compliance software specialist Marlow has sold part of its business to private equity investor Inflexion for £430m. This represents a 121% premium to its current market capitalization of £348m.

The deal also includes Worknest, a Chester-based employment and health and safety adviser previously known as Ellis Whittam, which Mr Marlow acquired from LDC in 2020 for £59m. Vista Employer Services is a Manchester-based company and CQC Compliance is based in Preston.

The purchase price of £430 million represents 16.2 times expected adjusted cash EBITDA for the year ending 31 March 2023.

The company was admitted to AIM in April 2016 when it merged with a shell company and acquired Salford-based Swift Fire and Security.

Buy-and-build Marlow has seen its value plummet in recent years from a dizzying height of £1bn in January 2022 after acquiring Optima Healthcare for £135m .

Like many stock market listed companies, Marlow’s share price has fallen and its progress is increasingly limited by the challenge of raising further equity capital for all AIM listed companies. Its market capitalization at Monday’s close was £348m.

Alex Daker

Alex Daker, the son of former Daily Mail editor-in-chief Paul Daker, will step down as chief executive of Marlowe and lead the sold business.

Despite Inflexion acquiring 20% ​​of Marlowe’s sales and 40% of its adjusted EBITDA, it is selling for 123% of its current market capitalization, making it a case where the market capitalization of a listed company is significant. This shows that it is below the basic level. the value of their assets.

The 25 acquisitions that created the division cost around £300m and include Worknest, Vista and CGC, as well as: Israel-based Vinci Works paid £54 million. William Martin (£33m). IMSM (£17m). and Barbour EHS was acquired for £32m.

Mr. Marlowe intends to use the proceeds from the transaction to pay down debt and return cash to shareholders, but he plans to continue working on his remaining assets.

The sale is subject to approval from the Financial Conduct Authority, the Solicitors Regulation Authority and the National Security and Investment Act.

david bowcock

Legal advisors on the transaction are law firm Fieldfisher and director Adam Jones, led by senior partner David Bowcock in the Manchester office, and Chris Galley, Julia Vencoot and Charlotte Round. , Andrew Prowse and Keith Woodhouse.

Marlowe was represented by Goldman Sachs (Owain Evans and Kamran Ali) and Cavendish Corporate Finance (Ben Jaynes).

The buyer is represented by London-based Slaughter & May, EY and Houlihan Lokey.

Commenting on the sale in a statement to the stock market this morning, Marlow Chairman Kevin Quinn said: “This sale represents an excellent result for Marlowe and its shareholders and highlights the significant value created through the execution of our growth strategy. The valuation achieved demonstrates the significant potential in our business. This will reset our capital structure and give Marlowe strategic agility while delivering meaningful returns to our shareholders.

“After the sale, Marlowe’s business will consist of two market-leading compliance services divisions: Testing, Inspection and Certification and Occupational Health, with a clear and focused strategy for our core compliance services market. .

“Since 2015, Alex has been instrumental in building Marlowe into one of the UK’s leading companies in regulatory compliance, with a turnover of over £500m and over 5,000 colleagues through a combination of over 80 acquisitions and strong internal growth. We have thousands of customers across the UK. On behalf of the Board of Directors, I would like to thank Alex for this extraordinary accomplishment and for his outstanding leadership in building Marlowe. ”

Alex Daker, Marlow’s outgoing CEO, said: “It has been a privilege to lead Marlow since its inception, as it has rapidly evolved into the UK leader in safety and compliance. This sale represents a significant premium to our market capitalization and represents a significant It underlines the Group’s future strategy to focus on the highly attractive and regulated compliance services market.”