Growing revenue four-fold in eight years proves that BES Group is doing things very right. The TICC specialist’s journey since its 2015 carve-out by Inflexion has seen 16 acquisitions complement impressive organic growth.

There are lots of moving parts to get right to execute on an M&A strategy as successful as BES Group’s. The provider of premium quality engineering testing, inspection, certification and compliance (TICC) services was generating revenue of c. £40 million in 2015 during its carve-out from RSA plc led by Inflexion. The number stands at over £160 million for 2023, and the success is down to an impressive strategy of fostering organic growth as well as orchestrating strategic acquisitions. It’s enabled the firm to expand its reach and capabilities to make BES Group an agile and proactive participant in industry shifts, rather than a passive observer. It also means it can move quickly to address customers’ needs, which can evolve in today’s ever-changing risk landscape.

“We’re an inspection business fundamentally, so adding a business through acquisition not only increases our market share, but also our touchpoints with customers,” explains Sebastian Lomax, BES Group Director of Acquisitions. The firm can move from a single inspection per year to multiple as more assets mean more inspections – and thus greater share of customers’ wallets through the complementary services.

Success starts with sourcing. The firm’s meticulous set-up is akin to a well-oiled private equity machine, with a four-strong team dedicated to origination (and deal execution) pounding pavements to talk directly to businesses to develop relationships, complemented by formal pipeline management including deal management software.

The professional function was set up in-house, spearheaded by Sebastian using his knowledge from four years of running a BES Group division and understanding how the firm wanted to grow. “Inflexion flew the flag for us pursuing M&A growth, giving us every support as well as autonomy,” Sebastian enthuses.

His rare background of operational experience tied with M&A set the tone for the team’s diverse skills set. “We’ve created an industrialised M&A function of PE style within a corporate,” says John Breheny, Group Corporate Development Director and a former PE professional, so well versed in its workings. “The M&A team here is comprised of former PE professionals, M&A advisers and experienced industry operators, so there’s a great mix of complementary skills.”

This function has directly originated three quarters of the firm’s 16 acquisitions since its 2015 carve-out – with 12 of these deals coming in the last three years as M&A activity has increased following Inflexion’s re-investment into the business in early 2021. Inflexion’s strong reputation in the upper mid-market means the backer has excellent visibility on M&A processes, and BES Group is further supported by its vast adviser network, comprised of local niche boutiques through to the larger global firms.

The expectation is for this ratio to shift, with Inflexion’s international offices set to play a key role in BES Group’s M&A success as it looks beyond the UK and Ireland. Inflexion’s offices in Stockholm and Amsterdam are well placed for BES Group’s plans, while North America is also blipping on the company’s medium-term M&A radar.

“As we grow, we will increasingly look to larger opportunities and in other regions, so Inflexion’s sourcing input will increase in time,” John explains.

EQ matters

The human intelligence required for succeeding with M&A is vast. Understanding and trust are key to meeting the goals of both sides, according to Sebastian: “Some owners want to sell and go; others want to remain part of the business for a long time; others want to part ways a bit later after they reach certain milestones. Understanding their goals and establishing trust really helps.” For example a 2020 acquisition (Lantei) involved the planned retirement of a main shareholder, with another becoming MD and he is still in a senior role with the business.

This can take time, according to John who explains that a current live deal followed four years of building trust to eventually gain exclusivity. This is done in myriad ways, from partnering to provide solutions to customers to hosting technical and training seminars together – it depends on the motivations of the seller.

Money and reputation also talk, with deep pockets and a track record for delivering of paramount importance. “We have done a number of carve-outs recently and they’re complex and take time.

We’ve now got a reputation for deliverability and speed of execution, and this really helps win over vendors.

John Breheny, Group Corporate Development Director, BES Group

Financing transactions is important, with BES Group relying on its balance sheet, investment from Inflexion and its debt financing from debt funds. “Inflexion’s Capital Markets Team have introduced our multiple debt funds to us,” John says, meaning they can now benefit from the support of a number of financiers.

Optimising synergies

There is a great deal of M&A in the TICC industry, but to extract maximum value from acquisitions integration is key, according to Sebastian: “It’s important to ensure merged entities work well operationally, but the strategic focus is what really drives the value of putting businesses together.” Indeed the firm’s first civil infrastructure inspection acquisition was XEIAD in 2022, with revenues growing by over 90% since then as the Group makes the most of cross-selling opportunities.

This is a point of differentiation for BES Group in its sector, which tends to have lots of add-ons rather than strategic initiatives. “We apply focused integration, buying businesses where we can actively help with cross selling and also support some businesses with back-office functions, such as finance, IT, HR. People say it’s refreshing as we’re not a confederation of small businesses but rather have a disciplined focus that benefits everyone,” John explains. He adds that BES Group’s impressive acquisition cadence is just a fraction of the deals it looks at: “This discipline means we turn a lot of deals down as we ensure companies fit with our longer-term strategy.”

Part of this fit is cultural, with BES Group focused on businesses which support the Group’s risk management agenda, enhance its offering to customers and, most importantly, mirrors its people-focused culture according to Sebastian.

Of course BES Group’s M&A machine requires substantial resource. “Inflexion have backed us to do the deals and create a corporate development function, supporting with financial backing to invest in the team and giving us every encouragement.” The formal in-house team is supplemented by Inflexion as a sounding board, as the investor offers advice on how to source and structure transactions. “When we consider moving into a new sector, they can speak intelligently with us as they often have experience in the area,” John says. “The best is yet to come.”

All Inflexion portfolio companies, regardless of size or ownership stake, have full access to our dedicated value acceleration resources covering digital enhancement, international expansion, M&A, ESG, commercial strategy and talent management. Our M&A expertise has supported more than 470 acquisitions for our portfolio companies, including 100+ international acquisitions across 32 countries.