Business Achievers
For most entrepreneurs, wealth creation occurs when they sell their business. Nick Mulcahy and Gerry Byrne review some of the notable transactions from the past year
There were multiple sizeable SME trade sales in 2021, few more impressive than Eamon Waters (above) selling Beauparc to Macquarie. Other deals highlighted inside include eShopWorld, H21, ClaimVantage, Sentenial, Boxever, Hooper Dolan, Megazyme and Banach Technology
Houses aren’t the only assets that have been driven up in price by low interest rates. Business values have increased too, as trade acquirers load up with cheap capital, and private equity players seek meaningful returns for their institutional and high net worth investors.
Takeover activity among Irish SMEs accelerated through 2021. There is no definitive register of M&A transactions, and many slip under the publicity radar. One visible measure of activity is the Capital Gains Tax yield, which in 2021 was 40% ahead of the 2020 outcome.
In the following pages we focus on some notable SME-related deals, and there were scores more deserving of attention. In every instance, entrepreneurs were rewarded for endeavour, often over a period of decades, and their achievement is very real. Though creeping socialism is evident in most aspects of Irish society, by and large business people are left to get on with it (trading restrictions excepted), and it helps that the country has a deep well of funding, legal, accountancy and tax expertise.
One message that comes through from the various case studies is that size matters in terms of maximising the exit value. That’s particularly true when an overseas buyer comes calling, and they tend to pay more. For many firms, their attractiveness centres on embedded market position built up over a long period. They have often reached that stage by acquiring competitors. Then there is the cohort who spot a trend and get in ahead of the pack, either with IP or service delivery with a global focus.
A good place to start with our Achievers review is Tommy Kelly, the founder of eShopWorld (ESW), who cashed out to Asendia in April 2021. Asendia, a joint venture between La Poste Group and Swiss Poste, already owned 50.1% of ESW after buying into the venture in 2017. Consideration for mopping up the balance of the equity wasn’t disclosed, but it’s likely that Kelly grossed hundreds of millions of euros a few weeks before his 61st birthday.
In 2020, the ESW operating company enjoyed 70% turnover growth to €840m, delivering an operating profit of €29m. Cash generated from operations was €73m, double the outcome from the year before. On that basis, speculation of a €1bn valuation for ESW might not have been wide of the mark. Unlike some other Irish ‘Unicorns’, this one has been evidenced by bags of folding stuff for the shareholders.
eShopWorld is a cross-border ecommerce enabler. When retailers sell products online, ESW handles their taxes and tariffs, delivery, returns, fraud protection and data security. In 2020, ESW handled €60m of returns for its clients, and its end-year financial statement disclosed €16m in duties and taxes payable to tax authorities. ESW pays that over and then recoups from customers, without them having to worry about the red tape.
ESW operates as a standalone entity, with various Asendia subsidiaries across Europe link in with ESW operations, protecting the parcels market share position of the postal company proprietors. There are associate companies in the Netherland and Mexico, and Asendia says ESW’s group headcount was c.500 people at the time of the deal.
Tommy Kelly got going with ESW in 2010. Previously he was involved in the freight forwarding business, and he worked with Aramex from 2006 after the UAR firm purchased his business. He described selling-up to Asendia as an endorsement of ESW embracing the structural shift in favour of online shopping, and paid tribute to “incredibly talented and loyal staff” at the company’s Swords base in north Dublin.