19.10.2011

Lavendon snaps up Blue Sky

UK based international rental company Lavendon has acquired Blue Sky Access the aerial lift attachment designer.

Blue Sky designs and engineers products that are intended to improve efficiency and safety while working with aerial work platforms. The company had revenues last year of £400,000 with a profit of £100,000 and gross assets of £300,000. Most of the value in the company is related to intellectual rights.
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Lavendon is paying £3.4 million in cash, with an additional deferred consideration of £1.5 million payable in October 2012 and £1 million payable in October 2013. For a total of £5.9 million. A further consideration of up to £1.5 million could become payable over the next four years dependent upon future revenue generation.

Should Lavendon decide to licence Blue Sky technology outside its current territories of operation in the three years following the acquisition, a percentage of the associated profits will be payable to Blue Sky's current shareholders.
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Lavendon has been working with Blue Sky since 2008 and the company says that the acquisition is a further step in delivering its strategy of creating points of service differentiation. It adds: “there is a growing awareness amongst the Group's customer base of its ability to provide innovative solutions that can increase efficiency and improve the safety of employees.”

Blue Sky's latest anti-entrapment development, the Sky Siren, has recently been trialled by a number of Lavendon customers, the company says that it will provide a new and unique safety product capable of being widely marketed to a number of different end-user sectors.

The consideration will be funded from the Lavendon’s existing bank facilities, and, as part of the transaction, Lavendon will take over Blue Sky's net cash of £400,000.

Lavendon's Chairman, John Standen, said: "We are delighted to have completed the acquisition of Blue Sky. We look forward to continuing to work with the existing senior management team, all of whom will be retained, utilising their expertise and experience to develop further our service offering to our customers, in turn strengthening our position as the leading powered access rental company in Europe and the Middle East."

Blue Sky has over the past few years introduced a range of products from cladding panel manipulators for large scissor lifts, to steel pipe handlers for booms and scissors to a trip wire type safety device to help prevent inadvertent overhead crushing when using a boom lift.
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The company, founded in 2003, is owned by Paul Cummings - who led the team that acquired David Meek from the man himself - Kevin Gale and Stephen Harris.

Vertikal Comment

This is something of a surprise and we can only think that Lavendon must be exceptionally confident in Blue Sky’s latest products and its ability to exploit them commercially. This deal effectively secures a supplier.

The Blue Sky team will surely be delighted to have secured such a lucrative exit strategy, having achieved over £5 million in cash with an additional £1.5 million or more possible in the years ahead - And they keep their jobs and do what they enjoy doing.

How Lavendon has arrived at this valuation is a mystery, but given the nature of the Blue Sky business we have to assume that it is aware of new or existing products that can really give it an edge, especially with major contractors which it is keen to find ways to lock in. It is also possible that such developments will help improve its yield from such customers.

To an outsider this deal looks incredulous by any traditional method of valuing a business, for which Lavendon is surely the largest customer by far. However if Lavendon can really exploit the latest developments, the very scale of its operations could make it look a cheap deal in years to come - and after allcompared with technology (DotCom) valuations it is low.

Only time will tell, in the meantime perhaps Lavendon is interested in a publishing and information business?