Disruptive companies building through acquisitions

Purplebricks sign

By Gareth Iley, partner at Clearwater International

Plans to make Birmingham a clean air zone city were pushed forward last month as the city underwent an extensive consultation. A proposal to charge high pollution cars, lorries, vans and buses to enter the city centre within the A4540 middle ring road has triggered significant debate within the region.

The aim is to reduce the levels of nitrogen dioxide pollution in the city and improve health and life expectancy rates. Critics claim that it hits the poorest hardest and could simply divert polluting cars around the proposed zone, moving rather than solving the problem.

M&A in the region also saw intense levels of activity this month. Solihull challenger bank Paragon acquired Titlestone Property Finance for £48m.

Titlestone is owned by private equity firm Oaktree Capital Management. It provides residential development financing to property developers, forming part of Paragon’s strategy to diversify its income streams into specialist lending markets. It serves the SME builders market which accounts for over 40% of all new builds.

Paragon expects the demand for Titlestone’s products to be enhanced by a government initiative to increase house building in the UK to 300,000 homes a year by the mid-2020s. As some major lenders have reduced their exposure to the SME segment, Titlestone has established a strong competitive position.

Another Solihull headquartered group, Purplebricks, went on the acquisition trail this month when it purchased its Canadian counterpart DuProprio/Com Free (DPCF) for £29.3m.

The business received a £125m investment from publishing heavyweight Axel Springer in March 2018. Previously it had expanded organically into international markets, but the new funding prompted a more aggressive M&A focused approach. DPCF, like Purplebricks, pitches itself as a market disruptor focusing on charging a flat fee to list properties and no commission to customers.

Purplebricks recently announced that its UK sales were disappointing and therefore looked internationally for growth opportunities.

A fellow market disruptor ClickTravel also announced significant expansion plans after an undisclosed investment by BGF. ClickTravel has a proprietary SaaS technology platform which allows businesses to book hotels, flights, rail, meetings and events.

The business has been growing 30% year-on-year. Its cloud-based model has been particularly attractive to the SME market which has been deterred by expensive on premise counterparts.

ClickTravel claims that it received approaches from more than 25 US and UK-based private equity investors before choosing BGF. It will use the investment to focus on its core strategy which includes further technological development as well as a new SaaS-based product for the unmanaged business travel market.

Elsewhere, Birmingham-based TeacherActive had a significant focus on expansion. Clearwater International advised TeacherActive on its management buyout supported by TDC and Yorkshire Bank.

The business operates 18 regional offices and supplies teachers, education support staff and nursery nurses to more than 3,000 schools. The aim is to use the additional funding to drive growth into regional markets by expanding its branch network.

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