Why VINCI wants to be approachable and visible in the M&A market
‘We acquire on the theme of ‘connection’ and our best acquisition came from an unexpected direction’
Since working at VINCI Energies, Maurice Royen has been involved in at least 27 acquisitions. Today he is CFO and co-responsible for M&A. It will never become a routine job, he says: “Every acquisition is different. It is just like dancing; you always have to adapt to the style of your partner.”
The decentralised network organisation VINCI Energies is one of the divisions of VINCI, a conglomerate of companies active in the infrastructure, construction and energy sector and listed on the CAC 40. VINCI Energies focuses on networks and integration, performance optimisation, energy efficiency and data. Their activities accelerate the introduction of new technologies and support the digital transformation and the energy transition. In the Netherlands, VINCI Energies operates from more than 65 business units that are part of the network brands Actemium, Axians and Omexom and local brands. Each brand has its own area of expertise: industrial services, ICT and automation, electricity and networks, and the management and maintenance of buildings and installations. What these activities have in common, is the overarching theme of ‘connection’.
Suitable acquisition targets
The acquisition goals for the different areas of expertise of VINCI Energies in the Netherlands are based on a shared strategic plan, but the implementation of the M&A strategy is decentralised. Responsibility for M&A decisions lies with operational management. They are involved in acquisitions from start to finish; from prospecting to the integration of acquired companies. We do so with a wide scope. Royen: “We are not interested in buying direct competitors. Acquisitions must add expertise to our portfolio, or give us access to new markets or new customer groups. We approach the market with an open mind. We evaluate targets based on their fit into our portfolio and match with our culture. If a target falls within the theme of ‘connection’, we are interested to learn more.”
VINCI Energie Netherlands views M&A as a tool to deliver value, not as a goal in itself. The company has capped its growth through acquisitions at 25 percent of annual turnover (EUR 630 million). Therefore, the integration of the acquired companies in the organisation remains manageable, and the risks limited. The search for acquisition targets is an ongoing process for VINCI Energies. Royen: “We are in constant dialogue with everyone in our network. It is therefore widely known that we are interested to acquire companies that fit our portfolio. These can be companies with a succession problem, or companies that want to take a next step and are considering joining a strong group. It is also a matter of serendipity. The best acquisition we have ever made more or less happened to us. Sometimes, sellers appear from a completely unexpected direction."
Lower middle market
Although VINCI Energies does not shy away from larger acquisitions, it prefers small and medium-sized businesses (lower middle-market). “We are looking for pearls that we can string on our chain. If you are acquiring a company with 250 employees, you must have a team in place that can properly manage the integration. Smaller companies are easier to integrate - also in terms of culture." Ideally, Royen acquires companies with a modest EBITDA. Then there is more room for growth, he explains. “When we acquire a smaller company with a limited EBITDA margin, we can realise a significant improvement in results within a short span of time. This is due to our professional organisation with regards to management, reporting and processes. In addition, we can benefit from multiple arbitrage. It is obviously easier to improve the results of a company with a relatively small EBITDA margin than those of a company with an EBITDA of 15%.” In the latter case, the risk is too high, Royen explains. “Such acquisitions often come with high multiples. It takes many years to earn back the investment."
Besides added value, a ‘cultural fit’ with the core values of VINCI Energies is a requirement for any acquisition. Royen: “We usually know at first glance when a company does not suit us. It is a gut feeling, but based on our many years of experience. When I visit an office and speak with a few employees, I often know enough. This is why we always want to meet the management of a business before signing an SPA, because these are the people that play an important role in the integration.”
VINCI Energies is a prime example of a company that is growing rapidly through a programmatic M&A strategy. Due to its continuous focus on M&A and structured approach, VINCI Energies is able to complete several successful acquisitions every year. The membership of Dealsuite is part of this M&A strategy. “It is a great way for us to advertise to the market that we are looking for acquisitions'', says Royen. “Thanks to Dealsuite our profile is now more widely known and our network is expanding. As a result, we are being approached by more parties in the market — including businesses from abroad who otherwise might not have come to us."
VINCI Energies also uses Dealsuite to showcase its preferred mode of operation in an M&A process, so potential targets know what to expect. “We prefer to acquire a 100% stake and only buy companies that are profitable. We also value a personal approach during the deal process”, says Royen.
VINCI Energies steers for exclusivity early in the process. Royen: “I am not set on exclusivity in the first phase of the process, but as soon as we start negotiating a term sheet. On Dealsuite, you can indicate at what point you insist on exclusivity. We made it clear that we require exclusivity from the term sheet at the latest. In some instances we start contacts through Dealsuite in an exclusive setting right from the start, but in other instances more buyers partake.For us, this is not a problem, since this is only the introductory phase.”
Last year was a quiet year in terms of M&A for VINCI Energies. This year will be different, says Royen. VINCI Energies is currently working on several acquisitions. Some are still in a preliminary phase, in other cases the negotiations are well on their way. Royen assumes that he will soon be able to realise his first acquisitions via Dealsuite. “I’ve noticed that the quality of the content is getting better and better as the platform is becoming more widely known. I have set-up my search criteria so that I receive relevant information about deals that are suitable for us. Recently, I came across several interesting companies.”
Maurice Royen (CFO VINCI Energies) ‘I notice that the quality of the content on Dealsuite is getting better and better as the platform is becoming more widely known.’