Monsal (United Kingdom) - Dec 2007

unquote
01 December 2007

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Matrix Equity Partners has invested £3m to finance the management buyout of specialist environmental technology company Monsal Ltd from two retiring shareholders. The £3m funding package consisted of a combined debt and equity investment with Matrix citing the contractual nature of Monsal’s revenues as the reason for not seeking third party debt to support the deal. Matrix takes a significant minority stake in the business following the deal which is the third such where Matrix has provided an integrated debt and equity package. Cooper Parry Corporate Finance introduced Matrix to the deal and ran a competitive process in which Matrix beat off competition from two other private equity houses. New legislation is expected to drive demand for Monsal’s services and this attracted Matrix to the deal as well as the fact that it is a one of a very limited number of companies operating in this sector.

Company Monsal, based in Mansfield in Nottinghamshire, is a provider of sophisticated Anaerobic Digestion (AD) technology to the water utilities market. AD is a well-established industrial process for the treatment of biosolids that facilitates the break down of organic material by bacteria and which generates biogas as a by product. Biogas can be burned to produce ‘green’ electricity and attract subsidies such as Renewable Obligation Certificates (ROCs). Demand for advanced AD processes in the water sector is underpinned by regulatory requirements to reduce pathogen levels in residues and incentives to generate green energy from biogas. AD can also be used to process all organic waste, notably municipal waste, food and industrial waste. A high proportion of UK waste is currently sent to landfill. New legislation in the form of the EU Landfill directive limits the volume of waste that can be disposed of to landfill, requiring that by 2015, there needs to be more than a 65% reduction in the amount of biodegradable waste going to landfill as compared with current levels. A significant increase in landfill tax will be implemented from April 2008 to encourage diversion. AD has been identified by DEFRA as a key technology for treating waste and will attract maximum ROCs for renewable energy generation. Matrix will look to grow the business by expanding its core water servicing, as well as capitalising on the emerging market for treating other water streams. Founded in 1996, Monsal employs 28 staff and has a turnover of approximately £5m.

People Ashley Broomberg led the deal for Matrix and joins the board of the company. Matrix has appointed Tim Ross as chairman of the business. He is also chairman of a number of other Matrix portfolio companies. Adian Cumiskey is the managing director of Monsal.

Advisers

Equity - Harvey Ingram, Ateeq Ahmed, Rick Smyth (Legal)Equity - Ingram Forrest, David Forrest (Financial Due Diligence)Equity - PBD Consulting, Lisa Whelan (Commercial Due Diligence)Management - Berryman Shacklock, Roger Harcourt (Legal)Vendor - Cooper Parry, Ben Rookes, John Bryant (Corporate Finance)

Sourced from: UK & Ireland unquote" 360 (Jan 2008)