Borromin-backed Protect Medical buys Spencer Italia

The deal marks the first bolt-on for the company since Borromin acquired Söhngen in June 2019 via the holding company Protect Medical. The GP invested via Borromin Fund IV, which held a final close in March 2019 on €297m, surpassing its target of €250m. The fund is currently 37% deployed.

Nord LB and Oldenburgische Landesbank provided debt to support the original transaction.

The acquisition will expand the company's geographical footprint and product range, according to a statement. Söhngen's core areas of focus were first aid and wound care prior to the acquisition of Spencer.

"We had some contact with the business via an industrial contact and they informed us of the owner's potential willingness to sell," Nick Money-Kyrle, founding partner at Borromin, told Unquote. "We started to negotiate just over a year ago. The company had an adviser, so they were fairly well prepared, but the process started before we bought Söhngen. Once we were successful in acquiring Söhngen, it made sense to proceed."

The GP did not deploy additional equity to finance the deal. "We used an existing acquisition facility, but increased it slightly," said Money-Kyrle. "We secured it prior to the outbreak, but of course it took a little more time just to check that the facilities were still available, given that most banks have understandably become quite restrictive. We could have increased the equity part, but we did not need to do this."

Asked if the coronavirus pandemic affected the process, Money-Kyrle said: "We had all of the classic due diligence done before the outbreak of the virus. The virus itself has led to a small delay, but not a very substantial one, and given that Spencer operates in the emergency healthcare sector, their products are very much in demand at the moment. Operationally, the difficulties are that people on the administration side of the company are working from home. We were comfortable with the operating side of the business, but aware that – like any business situated in a virus hotspot – there remain risks to production capability; but so far they have been able to manage very well through that."

Money-Kyrle added that the coronavirus outbreak may affect the company's revenues. "It's not very easy to project the revenues – some of the products are seen as mission critical and the Italian government are acquiring these products directly. The company is fairly robust and we are expecting a general uptake as a result of the crisis. This did not increase the entry multiple, since price discussions were not reopened as we were so far along in the process. The outlook is positive when it comes to sales, but the company currently has to build up certain supplies so that supply chain disruptions don't occur, meaning that cash dynamics have changed a little."

Company
Spencer Italia produces EMS equipment for use in first aid and emergency services. Its products range comprises 1,700 items, which it sells in 120 countries. The portfolio includes oxygen therapy, resuscitation and transportation devices.

The business was founded in 1989 by Luigi Spadoni and is based in Sala Baganza. The company generated revenues of €19m in 2019 and employs 130 people. The add-on will double the revenues of Protect Medical.

People
Borromin Capital Management – Nick Money-Kyrle (founding partner).
Protect Medical – Udo Frankenfeld (managing director).

Advisers
Company – EY (M&A).
Equity – Taylor Wessing (legal); Accuracy Finance (financial due diligence).

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