May Gurney has taken a foothold in the UK local authority transport market by paying £34.9 million in cash for FN50 company TransLinc.
The infrastructure support specialist, with headquarters in Norwich, already provides maintenance services including highways repairs, refuse collection, and water pipes maintenance.
But the purchase of TransLinc will give it entry into the UK’s £730 million local authority specialist fleet services and £3 billion local authority passenger services markets.
Philip Fellowes-Prynne, chief executive of May Gurney, described the acquisition as a good strategic fit for the business and expected it to boost profits.
He added: “It brings into the May Gurney Group a portfolio of services and clients which are highly complementary to our existing business, augmenting our strong positions in highways and environmental services as well as further establishing the group as the leading support services business in the UK.”
Although local authorities have cut capital expenditure on transport and infrastructure projects as a result of Government’s austerity drive, essential maintenance budgets have on the whole been ring-fenced.
Mike Baldwin, May Gurney’s managing director of Group Services, said: “While local authorities are having to cope with funding cuts of 28%, they are increasingly looking to work with private and third sector specialists to outsource services to reduce costs and improve service outcomes.
“We expect to see this trend continue both in the provision of support services and specialist fleet services.”
Importantly, when both companies earn the majority of revenues from local authorities and with little overlap between clients, the sale will enable greater geographical reach and significant cross-selling opportunities as May Gurney is able to broaden its offering.
The purchase has already added £85m to its existing £1.5bn order book.
Nevertheless, acquisition and consolidation can often be shorthand for job losses, so should staff in either organisation be worried? Not according to Baldwin, who told Fleet News the deal was good news for employees.
He said: “This acquisition reinforces our strength in the support services market and gives both companies great opportunities for growth.
“Due to the exceptionally good strategic fit between the two firms, the complementary geographical footprint and the increased access to each company’s customer base, we believe the acquisition will greatly enhance career opportunities for all involved as we grow the business.”
TransLinc, which manages 2,800 specialist vehicles, employs more than 400 employees and its existing management team, headed by managing director Paul Wood, has been charged with driving forward the combined TransLinc/May Gurney specialist fleet services business.
But Baldwin stressed that the deal would also benefit its existing customer base. “Both the May Gurney and TransLinc management teams are focused on continuing to deliver excellent service standards to our clients,” he said.
“The acquisition will enable May Gurney and TransLinc to share expertise and streamline service provision across our public services client base and deliver better services at competitive rates.”
He added that both companies had received “positive feedback and support” from clients following the acquisition.
However, the TransLinc name will be consigned to the scrapheap with a rebranding exercise getting underway. Baldwin said: “This will be rolled out over a period of time and has been communicated to our employees and clients.”
TransLinc, which was originally part of Lincolnshire County Council, achieved earnings before interest, tax, depreciation and amortisation of £17.6m on revenues of £34.7m for the year to February 28, 2011.
At completion, TransLinc, which was sold by its private-equity owner, had total assets of £53.6m and the deal included £30.7m of customer contract-backed fleet financing obligations.