Quercus Corporate Finance advised the shareholders of Future Industrial Services (FIS) on the sale of the company to waste and resource management group, Augean.
FIS is a Liverpool-headquartered provider of hazardous waste management and specialist industrial services with branches in Rugby, Hull, Plymouth, Honiton and Berwick. The firm’s client base includes government bodies, major utilities and national and multinational corporations, and its operations extend across five waste processing, treatment and recovery sites – among them the UK’s only mercury recovery facility.
Acquired by Ancala Partners and Fiera Infrastructure in October 2021 in a £390 million deal, Augean is a Wetherby-based group that boasts 23 sites across England, Wales and Scotland. FIS chief executive David Lusher lauded the combination of the two companies in a statement. “I am incredibly proud of the FIS team and their clear focus on making us a better business for our customers, investors, employees and the environment,” he said. “It is important that the company we have built up together continues to flourish and grow. That ambition has culminated in becoming part of the Augean Group today.”
Quercus Corporate Finance advised the FIS shareholders with a team led by partner Mark Whelan and associate partner Neil Giles.
An Interview with Mark Whelan at Quercus Corporate Finance
Please give us some background into this transaction and the role that your team played.
Quercus acted as joint M&A advisers to FIS and NorthEdge, alongside EY Manchester, on the sale of the company to Augean. This involved preparing the business for sale, identifying and engaging with buyers and negotiating an agreed deal.
I had a prior relationship with David Lusher and Colin Stirling, FIS CEO and Chairman respectively, for a number of years and helped David to put together the MBO when David and NorthEdge acquired the business in 2017, so it was a real pleasure to have the opportunity to work with them again. Conversely, this was our first sale for NorthEdge and I am extremely grateful to Andy Ball and John Hammond for trusting us with this important exit.
What unique skills and professional experience did you draw upon as part of your involvement in this transaction?
Our philosophy at Quercus is to develop deep, proprietary knowledge in our chosen sectors, and our demonstrable experience in and around the circular economy was very important on this transaction. It meant that we understood precisely where FIS sits in the waste value chain and hence, we could best position the business in the market.
Our strong relationships with all the industry players at a senior level were also extremely valuable in approaching and engaging with potential buyers.
When advising on sales of this nature, what are the key considerations that you take into account?
Firstly, we only take on mandates where we think we can add value and deliver a successful outcome. As an independent owner-managed business, Quercus does not operate a portfolio business model, so deal completions are very important to us!
Every sale throws up different challenges, but the key consideration is always the client’s objectives. Many naturally want to maximise value whilst others are looking for a good home for a lifetime’s work. Ultimately, we want to create options for our clients and in our experience that is only possible on the back of high-quality preparation, so that is a big area of focus for us.
Did you encounter any significant challenges during the course of this transaction? How did you overcome them?
FIS is an exciting and fast-growing business, built on both acquisitive and organic growth initiatives. Our preparation for a sale coincided with a particularly strong period of organic growth, with some important new customer wins along with recovery from the effects of the COVID-19 pandemic. In addition, FIS continued its track record of strategic acquisitions with a highly complementary bolt-on to the Honiton business mid-way through the process. As a result, we had to carefully analyse and then articulate that growth and future upside to potential buyers to ensure that their valuations of the business properly captured that growth, rather than looking backward at historic results. We believe that we achieved this and got the buyers to focus on the right value drivers.
In what ways would you say that your work as a part of this deal fits the profile of your firm?
The sale of FIS is a very good example of the type of work Quercus targets as a firm. We are sell-side specialists with significant buy-side and capital raising expertise. We also have a particular specialism in the waste and recycling sector built on my 30 years of working in and as advisor to that sector. Our value proposition is very much built around our experience, expertise and international reach, and all three were very important on this transaction, especially our deep waste sector knowledge and our relationships with the key industry players.
What impact do you expect this deal to have on Augean and FIS, or on the UK waste management sector more broadly?
The coming together of both businesses will undoubtedly benefit both FIS and Augean and their respective employees as the strategic fit is strong, with plenty of opportunity to leverage each party’s strengths. More broadly, the deal is undoubtedly an important sector milestone because it demonstrates the important role that mid-market private equity investors like NorthEdge can play in helping to shape and develop the sector.
The deal has generated a lot of enquiries for Quercus from other waste operators looking to realise value and I am confident that the sector will remain busy. If you will forgive the pun, the Future is bright.