LONDON: Restore plc has entered into an agreement to acquire Rainbow HoldCo Limited, which trades as EDM Group Limited.
The acquisition represents a strategically important transaction for Rstore Plc aligned to its stated acquisition criteria which will be additive to its core Records Management business and transformational for its growing digital business.
Following the initial impact of COVID-19 in the first half of 2020, the Group has demonstrated a strong recovery and is focused on accelerating momentum against its stated strategy for growth via organic expansion, strategic acquisition and margin improvement through synergies and efficiency gains.
EDM is a UK based information management company offering solutions to large and medium-sized enterprises across four key solution areas: Records Information Management; Digitisation; Digital Mailrooms; and Digital Solutions. The Acquisition is transformational for the Group’s Digital business and consistent with Restore’s strategic priorities.
The cash consideration of £61 million on a cash-free debt-free basis is payable upon completion of the Acquisition and initially funded from the Group’s existing debt facilities.
Charles Bligh, Chief Executive of Restore, commented: “I am delighted with the acquisition of the EDM UK business and the value this will create for shareholders. EDM is a business that is well known to us, it is well invested with a loyal customer base and a terrific team of over 430, each of whom we welcome into the Group today. Bringing EDM’s scale and capabilities together with ours will deliver even better offerings for customers and build an even stronger UK player in the management of physical and digital data.
“This acquisition is in line with the growth strategy of the business outlined over the last two years, which is to grow our Records Management business and to enhance the product portfolio and market share in Restore Digital.”
Restore has a clearly articulated growth strategy, which remains unchanged notwithstanding the challenges presented by COVID over the last year. Restore’s mission is to be the most trusted and environmentally responsible provider to both the private and public sectors, delivering virtual and physical records and data storage, digitisation and automation of data processing, secure data erasure and destruction, IT recycling and relocation solutions.
Its strategy seeks to generate sustained organic growth from existing and new customers and to target the substantial acquisition opportunities that exist in most of the markets in which it operates, whilst applying strict investment discipline. In addition, the Group can drive margin improvement through scale, synergy and consolidation.
Restore’s board of directors believes that the Acquisition will deliver on the Company’s strategic acquisition objectives, whilst also being financially compelling for the Company, representing a transformative step in growing Restore Digital and expanding Records Management.
Digital is a core growth segment for Restore with a sizeable UK addressable market of approximately £250-£350 million, which is growing annually at approximately 3-4%, underpinning the long term structural growth trends which have been accelerated by COVID, with digitisation, flexible working and security of data becoming increasingly necessary for all businesses.
The Acquisition doubles Restore’s existing market share, and creates a stronger UK business which will benefit from operating as a larger platform, with the ability to deliver both cost synergies and cross-selling opportunities through accessing the wider service offerings.
The combination with EDM also unlocks the Group’s product roadmap around Digital Mailroom, Cloud and Business Process Outsourcing, fast tracking Restore’s delivery against its strategic growth objectives.
EDM is a high quality asset with scale, and the Acquisition will be immediately accretive to underlying earnings both pre and post the effects of the Placing. The Directors have identified operational cost synergies which are anticipated to generate annualised savings of at least £2 million by Restore’s financial year ending 31 December 2023, with the Acquisition expected to deliver ROIC in line with the Group’s target.
The cash consideration for the Acquisition of £61 million (on a cash-free debt-free basis), will be initially funded from existing debt facilities and represents a valuation of approximately 10x EDM’s current year EBITDA at the point of Acquisition. The valuation multiple is expected to fall to approximately 7.5x EBITDA, including the benefit of identified cost synergies.
The Placing is being undertaken to ensure that, following the Acquisition, the Group has sufficient headroom to execute on an identified pipeline of further bolt-on opportunities. Before further such acquisitions, the Placing would mean that expected pro-forma year end leverage was at or below 1.5x (calculated as Net Debt : pro-forma underlying EBITDA (pre-IFRS 16)).
The Acquisition and the Placing are not inter-conditional.
Restore is a leading UK provider of integrated information and data management, technology recycling and commercial relocation services. The Company provides physical and digital data management to a broad range of corporates in the private and public sector.
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