Aberdeen Murray Johnstone Private Equity has sold its majority stake in John Kennedy, the utility service contractor, to Balfour Beatty in a deal worth £43 million. The acquisition will strengthen the engineering and construction company’s position in infrastructure services and provide AMJPE with a cash on cash return of three times its original investment, or an annual IRR of 35%. The management team backed by AMJPE will stay in place.
AMJPE acquired the company in an institutional buyout in September 1997 committing £8 million to the deal. The Royal Bank of Scotland provided senior debt of £10 million. In June 2000 AMJPE invested a further £2.1 million to support John Kennedy’s acquisition of Pipeline Consultants. Under AMJPE’s ownership the company’s profits have grown and turnover has almost trebled. The number of employees has also increased three fold to approximately 1200.
Gary Tipper, a director of AMJPE and board member of John Kennedy, said: “This is a classic example of how private equity can meet the demands of vendor shareholders and the aims of management teams that want to develop their business to the next stage. When we acquired John Kennedy in 1997 we were able to meet the vendors’ aspirations, as they were able to sell the business without having to open their books to direct competitors. Our support allowed the experienced management team to grow the business both organically and by acquisition so that it now has clients all over the UK.”
John Kennedy’s was founded in the 1960s and now comprises two businesses based in Manchester. John Kennedy Engineering provides services to the water and gas industries, maintaining and renewing their pipes. Pipeline Consultants provides design consultancy and management services to regional water utilities. In the year to March 31, 2001, the company had sales of £72.9 million and an operating profit of £4.5 million, before goodwill amortisation.
The cost of the acquisition, which includes the assumption of debt, will be met by Balfour Beatty’s cash reserves and by the issue of guaranteed loan notes. Up to £250,000 is payable to management shareholders, depending on the profit performance of the business for the two years ending March 31, 2003.
KPMG Corporate Finance and Addleshaw Booth & Co advised the vendors.