Private client investment business, Connection Capital, has announced the sale of fire systems manufacturer Advanced Electronics to Halma Plc, a FTSE 250 company that provides products for hazard detection, life protection, personal and public health improvement and environmental protection.
The initial cash consideration for the sale is £14.1m, with potential deferred consideration of up to £10.1m based upon earnings growth to March 2015. This is expected to generate an initial return of 6.5 times the investment, pre-EIS, and eight times the investment, post EIS, over the life of the investment for clients of Connection Capital.
A higher return is possible on the deferred consideration.
The original investment was led by Bernard Dale, co-founder and partner of Connection Capital in 2003.
This provided Advanced, which is headquartered in Cramlington, Northumberland, with capital to support the company’s international expansion.
It is now recognised as a world leading supplier of fire systems, including alarm control panels, fire systems, fire paging and suppression and extinguishing control panels which it markets in over 60 countries worldwide.
The company has grown significantly since the investment was made and now has a team of 125 with additional offices in the US, Dubai and India.
Projects to date include The Shard, Waterloo, St Pancras & Edinburgh Waverly Stations, Millennium Stadium and Westfield shopping centre.
Led by the incumbent management team, sales have grown from £1.2m at the time of investment in 2003 to £14.6m in 2014.
The management of Advanced remains in place and will continue to operate the business.
The acquisition has been funded from Halma’s cash and debt facilities.
Advanced will operate as a stand-alone business within Halma’s Infrastructure Safety division.
Connection Capital’s clients’ investment also benefitted from being structured as EIS eligible, which ensured that the proceeds are exempt from Capital Gains Tax.
Connection Capital is a leading private equity investor in the UK SME market, whose clients commit capital, on a deal by deal basis, via a managed syndicate to established, already profitable businesses with ambition to grow.
Connection Capital, which is not sector specific, seeks to back strong, experienced management teams that are committed to the business and have a clear and demonstrable track record of achievement.
In addition to capital investment, Dale and his team work closely with the management teams of companies they back to drive growth and, as was the case with Advanced, are able to source chairmen and other non-executive directors with the necessary, relevant experience from within its own network of more than 750 clients.
Advanced Electronics was advised by Paul Mankin, head of the PwC corporate finance team in Newcastle; Duncan Reid, head of the Watson Burton Corporate Law team; and Dean Harris, KPMG Tax.
EMW provided legal advice to Connection Capital and other minority shareholders.
Dale said: “We backed an experienced team and as a result of their hard work and world class products derived from its in house R&D, the company has grown significantly since the investment was made in 2003 from a business of 25 people in 2 UK offices into a global, market leader in this sector.
“We believe that the sale to UK based Halma is the right exit route for both the management team and investors.”
Ray Hope, managing director for Advanced Electronics said: “We’re delighted to be signing the deal with Halma, it’s the perfect partnership to help us step up to the next level and hit some big international milestones.
“Halma’s ethos is similar to Connection’s. It invests in exciting, successful businesses and supports the existing team to continue growth and development. It’s good news for all our customers, partners, investors and employees and we are more excited than ever for the future of Advanced. PwC and Watson Burton have provided a first class service to Advanced, and through their hard work, dedication and professionalism, helped to ensure this deal got over the line.”
Andrew Williams, chief executive of Halma, said: “Advanced complements Halma’s existing Fire business and reinforces our focus on growth in international markets, where fire system product approval regimes are becoming increasingly more challenging to navigate successfully.”
Paul Mankin, of PwC, said: “We are delighted to have advised the Advanced shareholders on this transaction. Although our global network identified potential partners from around the world, it is particularly pleasing that a UK Company was able to demonstrate that it will be a great owner for Advanced going forward.”
Duncan Reid of Watson Burton added: “This deal marks the beginning of an exciting new chapter for Advanced. Not only will the new partnership with Halma offer increased opportunities for growth, it will also help raise the profile of the North East as a place to do business on an international level.
“We are very pleased to have advised Ray and the management team on this transaction and look forward to watching Advanced grow.”