inTec Business Solutions in acquisition talks with UK-based peers

Article from MergerMarket: 07.04.20

inTec Business Solutions, UK-based technology-related consultancy services company, is in acquisition talks with UK-based counterparts, Chairman Simon Howitt told Mergermarket.

Management is discussing potential transactions with companies located in the Midlands, Home counties and South Wales, Howitt said. Manchester-headquartered inTec’s past targets have centred on England’s North West region, he added.

The company is focussed on targets that are well versed in its core offering or which enable entry into either new revenue streams or geographic locations, Howitt said. Target dossiers from vendors and third-party advisors are of interest, he said, adding that several counterparts have contacted the company for a possible takeover in recent weeks. It also receives target information from unspecified sources, he noted.

The company has a variety of advisors, including Knight Corporate Finance, which it can call upon for deal due diligence matters, he said. Freedman, Frankl & Taylor audited inTec latest financial statement, Companies House data shows.

Deal timeframes are unavailable at this juncture, as the coronavirus outbreak has prompted management to focus on staff wellbeing and client demand, he said. The technology and telecoms industries are business-critical tools, and are therefore somewhat protected, he added.

Its pre-emptive contingency plans meant inTec was able to transfer its central office operations within a matter of days while helping clients migrate to a home-working platform, he said. With business now returning to “some semblance of order,” the focus is on ensuring all client needs are catered for, he added.

However, it expects further buying opportunities to arise in the current economic environment as industry counterparts could seek tie-ups with larger entities, he said.

Separately, end-user demand for contracts with all-inclusive IT and telecommunications organisations could also spur acquisition activity, he added.Profitable businesses generating annual EBITDA between GBP 300,000 and GBP 600,000 and operational for more than 10 years are inTec’s sweet spot, with off-market companies preferred, he said.

The company’s turnover is around GBP 9m, Howitt said, but declined to specify gross profit. Management could review businesses operating outside of its financial range and/or in a sales process, Howitt said. Its business model is focused on counterparts where owners want to become part of a larger group rather than exit, he added.

Acquisition funding options include tapping debt facility provider BOOST & Co, Howitt said, noting that inTec had previously used the venture capital firm for deal financing. Borrowing capital from other financial parties are among other mechanisms constantly being reviewed, he said, adding the financial markets are still liquid despite the UK’s lockdown.

No decision has been made whether to trigger private equity investment, although preliminary talks were ongoing prior to the outbreak, Howitt said. If undertaken, the move would be based on inTec’s inorganic growth strategy rather than coronavirus-related working capital needs, he said. The company has sufficient capital and financing alternatives in place, reducing the need to seek government funding, he added.

Howitt is named as a person with significant control in inTec, alongside director Raymond Bell, according to Companies House data.

Past transactions undertaken by inTec include last month’s purchase of iTek Computer Solutions, a Kendal-based IT consultancy, for an undisclosed sum. Other deals include the November 2019 acquisition of IT support company Titan Networks, as well as the August-dated move for Cheshire Business Services, a communication packages provider.