Deal in focus: Maven buys SPS in MBO

The transaction saw Maven carving out the promotional merchandise supplier from former listed parent 4imprint group, with debt supplied by PNC Business Credit.

Private equity is no stranger to this sector with HIG Europe having acquired SPS's former sister company Brand Additions, which focuses on supplying large corporates, from 4imprint in a £24m deal in March 2012. The two businesses have different focuses: SPS sells to distributors while Brand Addition works in partnership with corporate clients to create complete merchandising solutions.

According to investment director Ryan Bevington, who led the deal for Maven, separating the business from its parent was not the main challenge, unlike most typical carve-outs: "The company was in many ways operating as a standalone business. The trickiest part was separating the banking facilities." There were, however, other challenges: "We had to be particularly mindful of confidentiality, given that the owner of SPS was a listed business," says Bevington.

Blackpool-based SPS supplies promotional merchandise to distributors across the UK and Europe, offering items such as mugs, keyrings, mouse mats and stationery items that can be branded with company logos. Unsurprisingly, the company experienced a drop in revenue during the downturn; however, it proved its resilience as sales only fell marginally from £20m pre-crash to £17m in the midst of the crisis. Furthermore, Bevington believes that companies are increasing marketing budgets for promotional products as confidence in the UK market returns.

Acquisition opportunities
Improved marketing budgets aside, SPS operates in a highly fragmented market, offering plenty of scope for acquisitive growth. "There are lots of small, independent companies in this space that are available for acquisitions," says Bevington. "We've already been contacted by a good number of businesses seeking a sale." Maven will concentrate on UK acquisitions as well as opportunities in Europe. The company currently generates 10% of its revenues through exports.

Furthermore, SPS is well positioned for organic growth thanks to its constant focus on product innovation. "One of the keys to growth in this market is new product offerings, as distributors demand a constant stream of new ideas," says Bevington. SPS always has an eye permanently trained on product development with company executives travelling to China and Hong Kong several times a year for inspiration. The business can safely test new items by importing them first to gauge the UK market's appetite, and if successful can consider manufacturing the goods in-house. According to Bevington, the company currently manufactures 50% of its product range at its 8,300m² site in Blackpool.

Another attraction to SPS comes through potential exits to large European or Asian trade buyers.

The state of the economy in the UK and Europe is the only major threat to SPS, as seen during the most recent downturn, it is typically marketing budgets that are the first to be cut when consumer spending is threatened. However, having made it through the dire conditions of 2008 and 2009, some comfort can be taken in the company's ability to survive in tough conditions.

People
Maven Capital Partners – Ryan Bevington

Advisers
Equity – Gateley, Paul Jefferson (Legal); Dow Schofield Watts (Financial due diligence).
Management – Addleshaw Goddard (Legal).

This deal was originally covered on 11 February 2014

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• Topics
• Buyouts
• UK / Ireland
• Maven Capital Partners
• HIG Europe
• United Kingdom