Tech panel: navigating B2G tech and tech enabled services 

The Government is committed to investing in digital transformation and a Labour government plans to go further and faster. But this will be against the backdrop of intense fiscal pressures, concerns over Labour’s proposed clampdown on consultancy spending, and greater scrutiny of value for money. 

For investors and companies navigating this space we co-hosted a breakfast panel with Flint to explore the changing environment for B2G tech and tech enabled services. On the panel were Liam McGivern (Managing Director at ICG), Mike Tattersall (Chief Delivery Officer at Hippo Digital) and James Snook (Director at Flint Global).  

Overall outlook for B2B digital/tech-enabled services spend

  • From a macro view, overall demand for digital/IT services has remained steady with fairly consistent buying trends and a continuing stream of high value contracts coming to market. However, competition on tenders has increased greatly with more companies looking to enter the public sector market. 
  • Both the Conservatives and Labour talk about a desire to reduce consultancy spend across government (not a new narrative). In any case this will not be possible for digital transformation (DX) due to the lack of skillset in-house and the expertise of third-party providers, which cannot be easily replicated in-house. 
  • The expectation is that there’ll be continued resilience in DX spend, a largely apolitical issue due to three main outcomes: increased efficiency, improved cyber security and derisking. 
  • We might see delays in procurement cycles and more scrutiny/bureaucracy on decisions with a new government looking to reduce consultancy spend. To get round that, companies should ensure they have a compelling business case and strong relationships with key decision makers.   
  • It is also important to note that the consultancy narrative is a political issue primarily for central government departments and there are many public sector organisations where this isn’t the case, such as ALBs (Arm’s Length Bodies) – including many standalone service delivery bodies – as well as local government, the NHS, and emergency services.

Opportunities for UK SME and midmarket companies  

  • There’s been a lot of change in government in the last couple of years (and more is expected regardless of the election outcome). New opportunities for companies often arise when key decision makers move around departments and like to bring their trusted partners with them.  
  • Companies need to be on the front foot and really understand the agendas of both existing and potential governments to understand where they are prioritising spend and where DX opportunities could arise. For example, any Labour pledges around tax reforms or NHS improvements could provide opportunities for DX project work.  
  • Tenders now talk about outcomes rather than products/services needed. For example, “our priority is to calculate the amount of time left on a prison sentence”. Companies responding to such tenders need to be proactive, strategic and demonstrate the ability to provide robust solutions to the problem that needs solving. 
  • There is also an expectation that just meeting the scope of work’s criteria is not good enough, it’s about going above and beyond and being a trusted advisor, as is the case in the private sector. You don’t just want the client to be satisfied at the end of a project, you want them to feel delighted with the outcome. There is a lot you can do around the edges on a tender to do that: How many free days do we put in? How many training days should we add for the team?  

Working with government, departments and politicians  

  • Government buyers place a high value on expertise – you can engage with them outside a tender process. If you ask the right questions and offer the right expertise, they can be very open on their priorities and problems. Being viewed as a trusted advisor with deep expertise, rather than a salesperson, allows you to build relationships/trust and shape the agenda without having them slamming the door shut citing ‘commercial sensitivity’. 
  • There’s more of an open door than you might expect. Companies also benefit from the fact that political parties see it as far more important to sit down with UK headquartered SMEs and midmarket firms than with large offshore companies.  
  • Politicians often don’t know the commercial solution to their goals/policies i.e. “this is what we need to purchase, implement and support to solve this problem”. They don’t have deep experience in the tech/product range out there and DX consultancies play a role in that. 
  • Companies often come in and solve a very specific piece of work with a fixed outcome from a tender that was decided a long time ago. Those that excel are the ones that lean into policymakers and look at what else they can do to help, continuously building those relationships. Taking a research-based approach can help, finding out what bugbears end users have then reverting that back to policymakers with solutions. Policymakers and end users are typically quite far apart, and a good DX firm bridges that gap. 
  • Unlike the private sector, budget lifecycle is very strict in the public sector. You need to be having conversations with budget holders at exactly the right time in the financial/budget lifecycle. For example, trying to speak to a department in June, when their budget was set in February is unlikely to lead to anything. Being part of continuous conversations with departments allows you to know exactly when budgets are being set and decisions are being made. 

Being deeply embedded within departments is key 

  • B2G GTM/sales models are different from private sector models and need to be assessed on a different set of criteria. 
  • For example, having customer (i.e. department) concentration can be positive for firms servicing the public sector. This is counter intuitive for investors who typically view customer concentration as a bad thing. Seeing a company that derives 60-70% of revenue comes from just one department (e.g. The Home Office) can look worrying on the face of it but highlights that it is the go-to DX provider for that department. In contrast, a company that has a low share of wallet across multiple departments would suggest that it was only at the edge of those departments and not the go-to provider (which is likely to be a hard to displace competitor). 
  • The sheer size of some departments should alleviate any concerns around spend, for example the Home Office in 2022-23 had a total budget of c.£20bn, greater than the entire GDP of Jamaica (c.£13bn 2022). 
  • That said, there are opportunities to sell cross-departments e.g. where your solution is ‘horizontal’/technical in nature (e.g. secure by design, managed firewall etc.), or where the problem you’re solving crosses multiple departments, for example a strong NHS DX provider could enter the Department for Education as child healthcare sits within the DfE. 

The Procurement Act  

  • The Procurement Act is a legislative milestone that’s been years in the making. It’s about how to make procurement better and more accessible.  
  • Both major political parties are committed to it but Labour more so and there is greater emphasis on dynamic procurement, flexible frameworks etc. 
  • There are broadly two things the government is trying to achieve with the Procurement Act: 
  1. The biggest contracts over the last 10 years have not been driving value and they want to be less dependent on poor performers.
  2. From a social goal perspective, politicians speak about SME and midmarket as the engine room of economy and want to support them by making procurement processes simpler. 
  • Alongside the Procurement Act is the (well overdue) update to social value framework. Midmarket companies should look to have a social value lead, that can go and talk to social value teams in government, who’ll be open and tell you exactly what you need to do to compete with large enterprises on social value. 

Hallmarks of a strong B2G proposition…  

  • There is a natural tendency to think good B2G businesses would have similar characteristics to B2B businesses but there are distinct criteria that are more important in B2G businesses, such as density and relevance within departments. It’s about having domain knowledge and knowing how to sell solutions by having access to the right people. 
  • Many of the best SME/midmarket B2G DX providers do not have dedicated sales teams. The sales teams are the technical delivery people. When writing bids/tenders, you don’t want salespeople with little technical understanding responding to proposals, you want the experts who know exactly what the problems and potential solutions are. This is a key differentiator for SME/midmarket players over large GSIs. 
  • Just being on frameworks and responding to tenders is below base standard, the best in breed SME/midmarket B2G companies are strategic, trusted advisors that are well embedded within specific public sector departments. 

Get in touch with a member of the team to discuss opportunities in the technology, business services and professional services sectors.

Mike Callow

[email protected]
+44 7894 594 500

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Ifan Dafydd

[email protected]
+44 7792 158 738

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Simon Hemsley

[email protected]
+44 7957 340 534

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Rupert Cookson

[email protected]
+44 7983 110 150

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Industrials: Opportunities for investors in high value, low volume UK industrial products 

Despite perceptions of the UK as a service-based economy, it remains one of the top 10 manufacturing nations in the world, with over £400bn in annual output. Whilst in recent years there has been more focus and more deals in industrial services, we are now seeing a renewed interest in UK industrial products from the PE community.  

There are good reasons for this:  

  • The UK has a comparative advantage in certain high-margin, high-demand sectors, such as advanced manufacturing, and high-value manufacturing with a strong focus on R&D  
  • There are a plethora of small businesses operating in the high value, low volume part of the market 
  • These businesses typically provide mission-critical products to sectors such as A&D, medical devices, and energy. Quality is crucial, and price is seldom a major purchasing factor due to (i) the mission-critical applications of these products and (ii) their low relative cost versus the overall product 
  • Often, additional services such as offering design elements further cement the crucial role of these firms for their customers 
  • Serving sectors such as healthcare and aerospace offer both growth opportunities and resilience against downturns. There is also plenty of demand for innovation in sectors such as automotive and energy 
  • Competition from low-cost manufacturing centres e.g. China tends to be low, as quality (rather than cost) is paramount, and high volumes are typically not required 

However, despite the opportunities, the sector is not without its challenges, which need to be fully understood before investment. These include:  

  • Skills gaps and access to talent 
  • The evolving role of technology 
  • Level of investment required in R&D to stay at the cutting edge 
  • Competition from comparable providers, both in the UK and Europe/US/Japan 

In the last few months, we’ve been helping our clients assess the opportunities and challenges in areas including semiconductor manufacturing, EMS, advanced composites and polymer solutions. 

Speak to a member of the team about opportunities in industrial products.

Matt McNally

[email protected]
+44 7894 736 523

Email Mike

Financial Services: Platform opportunities in compliance advisory attract mid-market PE attention 

Financial institutions of all sizes often require external compliance advice and support. The compliance advisory market is significant and ranges from the Big Four consulting practices through to freelance contractors. The boutique end of the compliance advisory market typically serves smaller to mid-sized clients. It is specialised, fragmented, growing, and continues to attract PE attention.  

Keeping up with compliance  

New entrant and mid-sized financial institutions can struggle to manage regulatory compliance with available in-house resources. They often look externally to supplement their inhouse compliance teams due to a lack of capacity, a lack of expertise, cost, and general concerns about the risk of regulatory enforcement down the line.  
 
The relationship with a compliance consultancy frequently starts with support on the FCA authorisation process and evolves into long-term advisory support either through retainer agreements or bespoke ad-hoc projects. This is an attractive business model for investors with a sizable portion of recurring revenue and a transparent revenue base. 

Trusted advisors 

Compliance advisory firms provide expertise, efficiency, and usually possess strong relationships with regulators. Their clients trust them to help meet rigorous regulator expectations. Once established, these client relationships are sticky and offer opportunities to sell on further services. 

A core part of the organic growth strategy is growing the client book through referral networks. Referrals come from adjacent professional services providers who also serve small to mid-sized financial institutions (e.g. lawyers, accountants).  

Typical service lines of compliance advisory firms include: 

  • FCA authorisation support 
  • Compliance advisory (via retainers or bespoke project work) 
  • Outsourced compliance support (e.g. audits, file reviews, reporting) 
  • Regulatory M&A due diligence 
  • Compliance training 
  • Compliance staffing solutions 
  • Compliance software products 

What investors are asking 

UK financial services compliance advisory services is a highly fragmented market. The Association of Professional Compliance Consultants (APCC) have over 150 members ranging from generalists to niche specialists operating in a specific regulatory area or sector. We have seen potential platform assets coming to the market in the last two years and expect to see more in 2024.  

A challenge for investors is how to segment the market meaningfully. There are many ways to divide up the market and it is difficult to benchmark a consultancy’s capabilities against its nearest competitors. In response we have created a framework to help investors and management teams segment this complex market and pinpoint where they can create value. 

Here are some common questions we have helped PE and management teams to answer: 

  • What is the size of the addressable market opportunity given narrow specialisms across FS verticals, regulatory areas, and service lines? 
  • What are forthcoming regulations likely to be, and how can a provider best position themselves to take advantage? 
  • What truly differentiates providers from each other? How can a provider protect against losing its own clients to its close competitors? 
  • What is the end-to-end client lifecycle? At what stage is the provider at risk of being replaced with the client’s in-house compliance function? What are the implications of this on the business plan?   
  • How does the referral network actually work? How successful is it in generating new business? How can it be further developed to win a greater share of referrals? 
  • What cross-sell/up-sell opportunities exist with the current client base?
  • Is buy-and-build a viable strategy in the market, and if so, what is the optimal strategy? How do M&A targets fit into an accelerated (inorganic) business plan? 
  • How is technology being used internally to improve margins? 

Please get in touch with a member of the team if you would like to discuss opportunities in the FS compliance advisory market. 

Solomon Ishack

[email protected]
+44 7943 036 633

Email Mike

Armstrong wins the Commercial Due Diligence Provider of the Year

We’re proud to announce Armstrong has been awarded the Commercial Due Diligence Provider of the Year at the Real Deals Private Equity Awards 2024.

In the last year, Armstrong navigated a complex market helping management teams and investors to evaluate performance and identify opportunities through our rigorous commercial due diligence and strategic advice. 

Our work is based on our understanding of each company and its market, its value proposition and differentiators, and the commercial opportunity available to it. We help our clients to assess the likely achievability of business plans given the macro backdrop (including inflation and energy costs), the difficulty in hiring and retaining talent, and the competitive dynamics of the markets they operate in. Meanwhile our sector experts continue to support teams with their investment theses and deal triage.  

This award recognises the hard work of our talented team which has given our clients the confidence to invest, innovate and grow in challenging markets. If you would like to find out more about who we are and what we do, please get in touch.   

Peter Cookson, Managing Partner

[email protected]
+44 7871 425 467

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Industrials: Building for the future 

The built environment is often equated with construction. It is so much more. Smart buildings and technology are transforming our environment, and their adoption is driven by regulation and climate change. There are so many components that go into smart buildings, and these continue to attract mid-market investor attention.

One example is installing a lift in a smart building: you’ll need engineers for the installation work; consultants to advise on how many lifts, footfall, their load and capacity; software to run and monitor the lifts; specialists on energy consumption; and facilities management to monitor and maintain them. A question for those providers is how deep do they specialise and what services can be joined up to offer a comprehensive solution to their customers?

A large underlying market…

In recent years, assets operating in the built environment have been out of favour because of the preconception that performance is linked to construction cycles. This does not take into consideration that UK infrastructure is ageing and there’s a huge amount of refurbishment going on. What better time to convert these buildings into smarter, greener buildings? And there’s a large installed base. Even if landlords are not planning to do anything smart with a building; buildings need to be maintained, monitored, and meet regulations.

… connected to our infrastructure

It is also important to consider how buildings are integrated into their surrounding environment and technology can support more efficient and high-quality service connectivity. This could be from the water pipes to the need to install EV charging stations. We see opportunities for companies that can help landlords monitor and manage the health of their assets from the outside in.

Here are three areas where mid-market in PE is successfully creating value in smart buildings:

Geospatial: There has been a significant increase in uptake of geospatial technology in the last six years. It is now considered a critical element in projects across sectors and is used at scale in areas ranging from marketing of real estate to EHS (Environmental, Health & Safety). Adoption and opportunity vary by sector with significant potential for growth in the slower adoption sectors like construction and engineering.  Read our recent article about what is driving growth here.

TICC: Preventative maintenance and condition monitoring continues to attract investors to TICC. There are lots of small TICC specialists, read our article here on how to find the value in them.

Facilities Management: There has been recent activity in the FM sector and investors will need to understand how their assets fit into the broader build environment trends. Successful companies will need to take the lead in making buildings greener and more efficient. Read our article on the opportunities (and tough decisions) facing facilities management providers here.

Please get in touch with a member of the team if you would like to discuss opportunities in industrials and the built environment. 

Brandon Matthews

[email protected]
+44 7771 401 723

Email Mike

Financial Services:  Supporting the acquisition of RiskQuest by Zanders

Armstrong is delighted to have provided commercial due diligence (CDD) in support of Zanders’ acquisition of RiskQuest.

Zanders is a global independent treasury and risk consulting firm with 30 years of experience in providing innovative solutions to multinational corporations, financial institutions, public sector entities, and NGOs (Non-Governmental Organisations). The company has grown strongly to become a leading global consulting firm with 450 employees across Europe, the Middle East, the US, and Asia.

Based in Amsterdam and founded in 2008, RiskQuest specialises in building state-of-the art models for managing financial risk, developing sustainable strategies, and preventing financial economic crime. The business has an impressive customer base and services all major Dutch financial institutions, including the Dutch Central Bank. 

This strategic acquisition is set to further strengthen Zanders’ presence in the European market and reflect a shared commitment to deliver excellence, paving the way for strengthened services and increased market influence.

Armstrong interviewed a range of RiskQuest’s clients to help develop key recommendations to maximise the business’s potential, and enhance the proposition of the combined group.

Sjoerd van Zoelen, Chief of Staff at Zanders said: “The Commercial DD work that Armstong has provided was very helpful. With their report it was easy to understand the relationship that RiskQuest has with their clients. Furthermore, the report clearly shows any business opportunities in different areas of expertise.”

Jack Hibbs, Engagement Manager at Armstrong said: “We really enjoyed working with the Zanders and RiskQuest teams and are thrilled to have helped with the transaction. We are looking forward to seeing the success of the group going forwards.”

If you are interested in talking to Armstrong about opportunities in Financial Services, please contact:

Jack Hibbs

[email protected]
+44 7883 296 346

Email Jack

Solomon Ishack

[email protected]
+44 7943 036 633

Email Solomon

Simon Hemsley

shemsley@armstrong-ts.com
+44 7957 340 534

Email Simon

Built Environment: Supporting the acquisition of Murphy Geospatial by Woolpert Inc.

Armstrong is pleased to have provided due diligence to Murphy Geospatial, a multidisciplinary geospatial solutions provider on its sale to U.S.-based Woolpert Inc.

Headquartered in Kilcullen, Ireland, Murphy Geospatial is a private, family-owned company that delivers a broad range of services that include survey, mobile and indoor mapping, asset monitoring, subsurface engineering, and 3D digital twin development. Murphy Geospatial has six offices across the UK and Ireland and employs nearly 400 experts who have delivered more than 27,000 projects.

Woolpert is a private, architecture, engineering, and geospatial firm that was founded in 1911 and has been providing comprehensive and integrated geospatial services for more than 50 years.

The acquisition of Murphy Geospatial will drive the expansion and elevation of Woolpert’s geospatial footprint in Europe and enable the companies to align best practices, leverage operational efficiencies, and improve its offering to customers.

Armstrong provided focused vendor CDD which included in-depth interviews with market experts, a detailed assessment of Murphy’s geospatial market, assessment of market dynamics, and in-depth interviews with customers.

If you are interested in talking to Armstrong about opportunities in the Built Environment and Technology sectors, please contact:

Brandon Matthews

[email protected]
+44 7771 401 723

Email Jack

Industrials: Supporting the acquisition of Checkmate Fire by IK Partners

Armstrong is pleased to have provided sell-side Commercial Due Diligence support to fire protection specialist Checkmate Fire (Checkmate) on its sale to IK Partners.

Founded in 1989 with headquarters in Elland, Checkmate is the UK’s largest passive fire protection specialist providing a comprehensive range of fire protection services to businesses across the healthcare, education, government, social housing, and commercial sectors.

Checkmate operates across the UK and has over 200 employees. The Company is responsible for maintaining passive fire systems in around 2,000 buildings to ensure compliance with increasingly stringent regulations, carrying out over 30,000 fire door remediations or replacements per year. 

The acquisition will allow Checkmate to further develop its passive fire offering and continue to invest in its people and technology whilst executing a targeted M&A strategy.

Armstrong provided full scope vendor CDD which included in-depth interviews with market experts, a detailed assessment of Checkmate’s passive fire safety market, how its competitive environment is evolving, and in-depth interviews with customers. We validated Checkmate’s growth plan, which presents exciting opportunities across its core end-sectors.

Please get in touch to discuss opportunities in the Industrial and Built Environment sectors.

Matt McNally

[email protected]
+44 7894 736 523

Email Jack

Brandon Matthews

[email protected]m
+44 7771 401 723

Email Brandon

Tech: LDC’s investment in 15below

Armstrong is delighted to have provided sell-side commercial due diligence (CDD) to support 15below, the travel industry’s leading provider of automated passenger communications software, on its investment from private equity firm LDC.

Brighton-based 15below was established in 2000 and has become a market leader in hyper-personalised, automated passenger communications. Its platform supports more than 60 of the world’s best known airlines, rail operators, and travel management companies, offering real-time operational updates including booking confirmations, boarding passes, and disruption alerts to passengers.

Armstrong’s work included in-depth interviews with 15below’s clients and partners, detailed analysis of the market and competitive environment, and an assessment of potential adjacent opportunities. Armstrong’s commercial strategy work also evaluated the key growth drivers in the business plan to validate the investment hypotheses.

With plans of accelerated growth, the partnership forms part of a strategic move to enhance 15below’s proprietary software and expand its client services, with ambitions to deliver an even greater number of innovative solutions that meet the evolving needs of global travel companies and their customers.

Nicholas Key, CEO at 15below said: “The Armstrong team was great to work with. They quickly understood our business and the complex industry dynamics, and were responsive and helpful throughout the process. The report produced for us has been invaluable for the business up to this point, and the insights gained will continue to have an impact on our decisions going forwards.”

Jack Hibbs, Engagement Manager at Armstrong said: “15below is a high-quality business with an impressive management team and excellent opportunity for growth; taking on investment will help the business continue its trajectory. We really enjoyed working with the 15below and Clearwater teams, and very much look forward to seeing the success of the business going forward.”

If you are interested in talking to Armstrong about opportunities in the Tech or Travel sectors, please contact:

Mike Callow

mcallow@armstrong-ts.com
+44 7894 594 500

Email Jack

Jack Hibbs

jhibbs@armstrong-ts.com
+44 7883 296 346

Email Jack

Federico Romanelli

fromanelli@armstrong-ts.com
+44 7908 906 907

Email Federico