05.08.2009

EPL Goes to Lavendon for £4.2 million

The Lavendon Group has purchased the ‘assets and trade’ of EPL the UK based powered access rental company from its administrators.

The deal includes assets with a book value of around £6.6 million and includes a transfer of all 105 staff and directors to Lavendon Access Services, the premises, customer lists and order book etc...

The sum paid is £1.3 million plus, outstanding debt/finance of £2.8 million and includes 320 aerial lifts of which around 250 are thought to be vehicle mounts.

The seven premises include one owned property in Birmingham which is included in the assets, while the other six locations will be transferred on licence, giving Lavendon three months to vacate or decide retain and negotiate new contracts with the landlords.

Lavendon says that it anticipates restructuring costs of around £500,000 to integrate the business, which it expects to have completed by the end of the year, making annual savings of around £1.5 million.

The company does not expect that there will be any demand or requirement to refer the transaction to the UK Competition Commission. The successful bid was one of four following expressions of interest from around 60 potential investors.

EPL, which had revenues of £8.1 million and an operating profit of £500,000, will be merged into Lavendon’s Skylift business, possibly retaining the EPL name in the same way it merged the Platform Company name into Nationwide Access to create Nationwide Platforms. EPL Skylift?

Lavendon's chief executive, Kevin Appleton, said::"This acquisition strengthens our UK market position in vehicle-mounted access platforms. Through elimination of overlaps with our existing business, we anticipate a rapid return on our investment following completion of the integration programme."

"Whilst our focus on cash generation and debt reduction remains very much in place, given our scale and operational efficiency we can absorb acquisition opportunities such as this on very attractive terms in the current environment".

Ian Corfield, restructuring director with adminstrators KPMG added: "We are very pleased to have been able to sell EPL Access Ltd as a going concern, saving jobs and achieving the best possible result for all creditors. I'd like to take this opportunity to thank the customers and suppliers for their ongoing support in this difficult time which has helped to ensure that this business has been able to continue and has contributed to the retention of 105 jobs."

Vertikal Comment

At first glance one had to wonder about Lavendon’s strategy- bidding for EPL, snapping up a competitor and helping consolidate the market is not usually the most successful of strategies. Especially during tough times, when the focus is on reducing debt levels and leverage.

However – the acquisition does add some real strength to the Skylift business and given that it can rapidly make substantial depot and HQ cost savings the EPL business suddenly looks very profitable, even allowing for a 20 to 25 percent customer loss to competitors.

One concern of other bidders was the staff longevity and therefore high potential cost of ‘restructuring’ the business. However given the price it has paid and the fact that it is likely to retain a large proportion of the staff, this does not look to be a major problem for Lavendon. It is a classic case of “leveraging its size’.

Barring a complete melt down in customer loyalty, which is highly unlikely in any rental business that retains the staff, let alone the vehicle mounted business – the payback is likely to be around 18 months. Not a bad investment in these low yield times.