Steel fabrication business acquired for an initial £12m
Listed structural steel group, Severfield, has signed an agreement to acquire DAM Structures Limited, a steel fabrication company for a net initial consideration of £12m.
As part of the deal, a further maximum deferred consideration of £7m is payable in 2022, together with a performance-based contingent consideration of up to £8m, which would be payable over a five-year period.
Severfield, which is based in Thirsk, says the transaction will give it immediate access to “attractive, complementary market sectors with strong growth potential” including the propping, railway and steel piling markets.
It says combining the businesses will enhance its position as the UK’s broadest structural steel services group.
And the business notes the deal will provide new clients from which to grow its existing services, while also offering a platform to widen its supply chain into its existing client base.
For the 12 months to 31 October 2019, DAM Structures, which is based at Carnaby near Bridlington, recorded audited revenues of £22.3m and a profit before tax of £1.9m. The value of the gross assets as at 31 October 2019 was £14.2m.
Prior to the acquisition, DAM Structures was approaching its maximum production capacity, which had the potential to constrain its future growth.
With the scale and capabilities of Severfield, the acquisition is intended to facilitate an immediate increase in the production capacity of DAM Structures, enabling it to realise the growth opportunities which have been identified.
Alan Dunsmore, chief executive officer at Severfield, said: “This is a very exciting, highly complementary acquisition which will help the Group continue to deliver on its strategic growth objectives.
“DAM Structures will provide us with access to existing and new customers earlier in the construction process, as well as access to new market sectors with strong growth potential including the growing rail electrification sector.
“It has an established client base and proven track record of delivering quality services and will fit in well with the Severfield culture and team.
“We look forward to working with the DAM Structures management team on building new business opportunities together and driving future growth from within the combined Group.”
The acquisition consideration will be funded by a combination of cash reserves and a term loan.
The vendors were advised by a team from the Leeds office of Grant Thornton, led by corporate finance director Duncan Morpeth supported by Jim Whittaker, John Whitney and James Boreman.
The firm also provided tax advice led by Douglas Tailby and Josh Smailes.
Martin Frost, corporate partner at law firm Andrew Jackson Solicitors LLP, assisted by commercial property partner Helen Mellors and corporate assistant Liam Hessay also advised DAM Structures.
Advisers to Severfield included Gordons (legal): James Fawcett and PWC: Will Oxley, Ben Ferguson and Nicholas Breeze.