‘It’s business as usual for now’
London-based investment group RD Capital Partners (RDCP) recently completed the acquisition of engineering and infrastructure construction business Killingley. We spoke to RDCP CEO and founder Sameer Rizvi, a Dealsuite member since September 2019, about the motives behind this acquisition, sourcing deals and M&A in times of Covid-19.
RDCP is a diversified investment group, controlling £60 million of investments in the healthcare, infrastructure and real estate sectors in the UK. Sameer and his partner Iryna Dubylovska are the sole shareholders in RDCP and all of its portfolio companies. Before launching RDCP in 2015, Sameer worked as an investment banker at Commerzbank and RBS in London. He holds a bachelor’s degree in economics and finance from McGill University in Canada and is a CFA charterholder.
How would you describe the investment profile of RD Capital?
‘We make investments from a balance sheet of permanent capital, investing solely for the long-term. RD Capital Partners (RDCP) targets high quality mid-market companies that have a demonstrated history of profitability and the ability to generate above average margins and strong cash flows. We require that the shareholders are independent of the management team, or at least have a clear succession plan in place. Our target sectors include healthcare (nursing homes, specialist care), infrastructure, construction, engineering, manufacturing, retail, fashion and real estate.’
Can you tell a bit more about the background of your recent deal?
‘Killingley is an award-winning civil engineering, earthworks, groundworks, commercial landscaping and grounds maintenance firm. Based in Chesterfield, Killingley was established in 1972 and is RDCP’s first acquisition in the infrastructure and engineering sector. Killingley employs 150 staff members and has an annual turnover of £16 million.’
Your main focus seems to be on the healthcare sector. How does the acquisition of Killingly tie in with the other businesses in your portfolio?
‘There are some synergies from a construction point of view. However, the primary motive behind this investment was diversification. We also saw an opportunity to acquire a leading infrastructure services business at a great price.’
Why did you branch out to infrastructure/engineering?
‘As we enter a post-Brexit market and once we get out of this COVID-19 situation, the government has a massive allocation towards boosting UK’s infrastructure. There will be numerous private and public infrastructure projects that Killingley will be ready to work on.’
How do you usually source deals?
‘We would not have come across the Killingley proposition without Dealsuite. But besides utilising Dealsuite, we work with a number of sell-side advisors, investment bankers and brokers. We also, on occasion, source deals by direct contact with business owners.’ Is there enough transparency in the UK M&A market?
‘I would say the market is decently transparent. However, information such as EBITDA and asking price being mentioned in the initial sales document would be helpful.’
Do you pro-actively engage non-PE-owned targets?
‘Yes, absolutely. Out of all the acquisitions we have done since our inception in 2015, only 15% have been PE-owned. The rest were owner-operated businesses that were on the market due to retirement or health related reasons.’
When it comes to value creation, how do you rank the importance of financial engineering, operational improvement, and strategic adjustments?
‘I would say financial engineering and deal structuring are the most important components in value creation. The deal can be won right at the outset. This is how we feel about the Killingley transaction. Operational improvements can be equally important in increasing the company’s revenue and/or reducing various operating expenses, thereby boosting EBITDA generation.’
Would you consider doing cross-border deals in the future?
‘At the moment, we continue to find lots of value in the UK. However, the one sector where we struggle to find suitable investments is real estate. Hence, when the time is right, we plan to make commercial real investments in Germany and France.’
Can you oversee the consequences of the Covid19-crisis on RDCP?
‘One of the only sectors that is “COVID-19 proof” is healthcare. Our care business, RDCP Care, continues to provide care for the elderly. Our staff are classed as “key workers” and continue to come to work. If anything, the government and the NHS now need our support in ensuring the discharged elderly have a bed ready for long-term care.
As of right now, Killingley is doing perfectly fine. We work on open-air construction projects and hence cannot work from home. Our clients have not stopped any projects either. It’s business as usual for now. However, naturally, there will be some slowdown in new project starts.’