A fire protection services business was acquired by a motivated strategic buyer, resulting in a transaction value nearly 2.3x higher than the initial estimate, surpassing $15 million more than assessed by a National Brokerage firm.

Initially appraised at around 3.5x EBITDA by a business brokerage firm, the directors sought a second opinion from BSP Strategic. The firm’s expertise in M&A uncovered significantly higher value potential. BSP Strategic was introduced in April 2023, and after reviewing the company’s financials, prepared an Indication of Value using YTD FY2023 accounts, showcasing a more accurate and substantially higher business valuation.

Industry

Fire Protection

Life Cycle

Growth

Size

70

Location

Western Australia

BSP Strategic conducted in-depth industry research, benchmarked KPIs, mapped the fire protection market and key players, and analysed global transactions to estimate a range of multiples. Their analysis showed the client’s revenue growth and EBITDA margins were industry-leading.

The business had strong customer retention, with many top customers under multi-year contracts. In May 2023, BSP valued the business at 4.0x to 4.5x forecasted FY2023 EBITDA, significantly higher than the initial brokerage estimate. Based on these findings, the directors engaged BSP to manage a confidential Expressions of Interest sales process.

BSP Strategic conducted a “Sale Fitness Review” to identify financial, legal, and operational risks that could hinder the sale, while also preparing key documents for the upcoming due diligence phase. They assembled a detailed Information Memorandum with adjusted financials and a FY2024 forecast, along with a teaser document for initial outreach.

Using their experience and market mapping, BSP identified a targeted list of strategic acquirers, including major industry players and private equity groups. Before going to market in October 2023, BSP provided an updated valuation, revealing a 24% increase in full-year earnings and nearly doubling the initial valuation over six months.

A direct marketing approach was initiated to engage key executives (potential acquirers) through a confidential process, after executing Reciprocal Non-Disclosure Agreements. The goal was to gauge interest, intent, and capability to complete a transaction while addressing business-related inquiries following the Information Memorandum review.

The sale process was conducted via an Expressions of Interest (EOI) format, without a strict timeline due to market conditions around the Summer holidays. Ultimately, six EOIs were received, featuring a range of offers from 4.0x EBIT to 6.5x FY2023 EBITDA, each with varied terms such as earn-out arrangements, golden handcuffs, and all-cash offers. After deliberation, the preferred suitor was selected, and an Indicative of Interest (IOI) was negotiated on an Asset Acquisition basis, marking the start of Due Diligence in early 2024.

The successful bidder, a major industry player with an in-house M&A team and top-tier external legal representatives, reviewed BSP Strategic’s secure deal room. After responding to 80+ “Requests for Information” from 20 buy-side advisors over two months, discreet inspections and meetings were conducted.

During due diligence, the buyer moved to a share purchase agreement. Following negotiations, a 6.5x FY2023 EBITDA multiple was agreed upon as the Enterprise Value. Both buy and sell-side advisory teams facilitated contractual negotiations, finalising the deal in May 2023 with an all-cash closing in early June.

The client’s accountant prepared the completion accounts, with BSP Strategic assisting in calculating the adjustment amount between the agreed PEG and final closing balances. The post-completion adjustment resulted in additional funds for the client.