Armstrong supports Melior Equity Partners’ investment in Salmon Software

Armstrong is pleased to have provided commercial due diligence (CDD) for Melior Equity Partners in support of its investment in Salmon Software, a fast-growing financial services software business that provides customers with a world-class treasury management system (TMS).

Customers use Salmon Software’s innovative, specialist software to efficiently manage their treasury function, including risk management, payments, cash management & forecasting, dealing, and regulatory reporting. Customers receive automated, integrated treasury management functionality, with built-in workflows and real-time business insights.

Founded by CEO John Byrne, Salmon Software has offices in Ireland and the Czech Republic, and a roster of international customers. The company’s TMS has evolved into one of the world’s most sophisticated treasury management products, reflecting the global financial industry’s technological innovation and increasingly complex nature.

The investment from Melior will support the future growth of Salmon Software, enabling further development of the core TMS product and expanded customer support.

Armstrong provided focused buy-side CDD, building on our team’s strategy and industry experience in the financial services and technology sectors. Armstrong assessed Salmon Software’s opportunity to expand in its core market by conducting an in-depth customer referencing programme, backed up by conversations with Armstrong’s network of market experts, and integrated into our deep analysis of a complex market and competitive landscape.

Esmond Greene, Managing Director at Melior Equity Partners, said:

“Simon, Ifan, and the Armstrong team provided Melior with a high-quality and comprehensive CDD report which evaluated our investment hypotheses on Salmon Software and the wider TMS market. We chose to work with Armstrong on this deal because of their financial services and technology sector knowledge and their ability to produce clear, useful conclusions for us and the management team.”

Simon Hemsley, Director at Armstrong Transaction Services, said;

“We look forward to seeing Salmon Software grow in partnership with Melior. The TMS market should continue its robust growth over the coming years, and Salmon Software is well-placed to take advantage.”

For further details on this project and Armstrong’s views on opportunities in the technology and financial services sectors, please contact;

Solomon Ishack, Senior Consultant

[email protected]
+44 7943 036 633

Email Solomon

Simon Hemsley, Partner

[email protected]
+44 7957 340534

Email Simon

Mike Callow, Partner

[email protected]
+44 7894 594 500

Email Mike

Wealth management: Lots of deals, but are there still lots of opportunities?

With so many deals in the wealth management sector, business owners and private equity investors are asking themselves:

· Are there still attractive IFA targets out there we can buy and create value in?

· How do we create value in an IFA business we have acquired?

· What value can we realise from our investment, and by when?

In this article we’ll share what you need to know and what you need to look out for.

The UK financial advice market

The UK financial advice market is fragmented – there are still more than 5,000 financial adviser firms – but with (by one estimate) more than 30 consolidators, have all the good platforms been bought now, and is there too much competition for the best bolt-ons?

The wealth management market has been buoyant, despite macro tailwinds and high multiples, as the underlying growth drivers remain strong (ageing/wealthy population needing advice, the “advice gap” – not enough advisers to meet demand, advisers’ control of client relationships, digital transformation means hybrid model can now work).

The ongoing wave of consolidation in financial advice will continue to create new firms in the future, as advisers become unhappy and leave to set up their own firms (despite so much M&A, the total number of advice firms is flat over the last five years).

Are there still attractive targets out there we can buy and create value in?

The market is still busy and competitive, so triaging opportunities quickly is important. High multiples, and large (upwards) adjustments to EBITDA, mean the deal team and CDD house need to get deep into the detail to find out what the key value drivers are.

Here are some things to consider when looking at an IFA investment;

· Management; Stable and competent senior management team with proven capabilities to support the vision that’s being invested in, and a proper succession plan.

· Culture; The firm culture has to be strong & distinct, to attract and retain advisers (and clients of course, but they are typically very sticky to an adviser, so advisers are the ones you need to keep happy). It needs to defend and enhance the firm’s differentiators, convince advisers to stay and persuade new advisers to join.

· Compliance; The firm’s regulatory compliance culture and record must be very good – no one wants post-deal surprises from previously hidden unsuitable advice or DB pension problems. Having a strong compliance function with good governance across the firm is non-negotiable.

· Good advice and excellent client service; The firm’s focus on and success at delivering good advice and excellent client service is less tangible but can be evidenced by a focus on financial planning (underpinned by products and wrappers, close client relationships, and better client outcomes – rather than just selling product). A deep understanding and analysis of the existing client base (e.g. high net worth individuals (HNWIs), high street, corporates/their staff, entrepreneurs) helps understand the client total addressable market (TAM) and target growth plan.

· Adviser headroom; Capacity for taking on new clients is a combination of how much time they have (new tech to improve efficiency is important post-deal), organisational structure, and also their willingness to do so. How much capacity do advisers have, and how much can be added post-deal, and does this underpin the future business plan?

· Tech; Financial advisers often have surprisingly limited front & back-office tech, what they have can vary between different suppliers, and the tech roadmap is generally under-developed. Digital transformation is over-used as a reason to invest, but in IFAs it usually means a good opportunity to reduce costs and extend reach as the business scales, particularly creating more adviser capacity.

· M&A targets & plan; To underpin a potential future M&A growth strategy, there must be an integrated and proven growth process that has been effective and efficient for previous M&A and hires. Given the firm’s culture, the business plan (including M&A strategy), the technology, and the profile of the typical acquisition; how many M&A targets are there in the market (and who are the likely competitors to acquire)?

· The business plan; This needs to reflect enough costs to acquire, integrate, and grow M&A targets (usually in a central services hub). It needs to be realistic as to how long it takes to do things with clients, (e.g. if the plan is to move acquired clients on to the firm’s in-house DFM, then that will take significant time) and contain risk mitigation plans to retain advisers (and their clients) during a period of change.

How do we create value in an IFA business we have acquired?

Organic growth is hard in the financial advice market (because client referrals is such an important source of new clients), so M&A is the classic growth strategy. Other ways you can create value are to unlock more adviser capacity, and to capture more client revenue by adding to your value proposition.

Here are some ways we’ve seen investors create value;

· Client revenue; Advisers typically capture more client revenue (typically 20-30 bps) by setting up an in-house DFM proposition [JB3] and moving acquired clients on to their DFM if they already have one. Some advisers are also thinking about building their own in-house investment platform using outsourced tech – this is still at an early stage, and feels difficult, expensive, and risky.

· Adviser efficiency; Presuming advisers want to take on more clients (some don’t!), then they need to find more time to service them. More use of better tech (e.g. full integrated, API-led, STP) combined with appropriate “lower cost” paraplanner support can increase adviser efficiency – this can be as basic as work allocation, email templates/automation, or as complex as automating the bulk of the admin work to assemble the information to do a client’s annual review, use of outsourced suppliers etc. Better use of modern tech should reduce cost-to/time-to-serve and give better data and also a better understanding of the client, with more client facing time.

· Client referrals; Advisers typically win new clients through word of mouth rather than search, but often do not have a formal client referral programme – this can be relatively quick to introduce but changing advisers’ mindsets (not wanting to ask for referrals) can take longer.

· Central services hub; Building out the firm’s central services hub can also take tasks off advisers, batching them and being done by paraplanner and administrator teams. Good advisers want to stay close to clients and their “own” paraplanner, so this must be done in a way that does not damage client service nor disengage advisers.

· Adviser succession plan; A good pipeline of the advisers of tomorrow not only gives a succession plan, but also as each adviser/client relationship matures helps supports the longer-term move from adviser as hunter gatherer to adviser client manager. Client managers are paid less, so this helps EBITDA margin.

What value can we realise from our investment, and by when?

There are now some good examples of successful exits, whether secondary deals to PE, to trade buyers, or to other consolidators. So our worry about who would buy all these consolidators has reduced somewhat, but you still need to make sure your financial advice firm is differentiated in bidders’ minds.

· Re-diligence; Doing re-diligence some way ahead of formal sellside CDD – looking again at what made the business attractive on the way in, and what’s changed since then – helps the investment team and corporate finance articulate why this financial adviser firm is more attractive than the other consolidators.

· Profitability; There is a thesis that most big financial advice firms lose money as growth is hard and expensive. Your value creation work should disprove this and mean that the business is significantly more profitable, and the operating model supports future growth. That needs to be clearly explained in the business plan (and the hopefully easy-to-use financial model).

· Technology and integration; Every financial advice firm is different, so a consolidator may well end up with many platforms, several cashflow modelling tools, different risk models, and various practice management tech. Integrating all of this effectively is complex and difficult, but needs to be done along the way, while integrating the acquired businesses and running the firm. The tech needs to be as integrated as possible, balancing “best of breed” vs. wanting as few systems to manage as possible.

More information

There is much more we can say about financial advisers in particular and wealth management more broadly – so we’ll stop here. Please contact Simon or Solomon to find out how we can help you.

Simon Hemsley, Partner

[email protected]
+44 7957 340534

Email Simon

Solomon Ishack, Senior Consultant

[email protected]
+44 7943 036 633

Email Mike

Making the connection: opportunities for mid-market PE in TMT services

The challenge for many in mid-tier private equity is finding opportunities to create value in the capex intensive Technology, Media and Telecoms (TMT) sector. Demand for connectivity over the last two years has gone through the roof and there’s no reason to believe it will fall away anytime soon.

Servicing tier 1 OEMS and Telcos

Macro trends in TMT around emerging technologies, land grab approaches to deployment and rapid pace of change and consolidation in the market is sustaining a growing ecosystem of service providers, targeting areas such as network design, maintenance, inspection and strategy. These boutiques have the specialist knowledge that larger scale providers lack and are far more agile than their in-house competition.

Tier 1 equipment manufacturers and connectivity providers are also becoming more comfortable with outsourcing to newer, more agile providers. This is in part due to their continued investment in their data teams. These teams are now better-informed buyers and understand the value third parties bring turning their data into meaningful reports which can be used to both improve customer experience and improve internal functions.

Speedy Results

Whilst the average connection speed available is fast in 2022, many telcos struggle to balance the speed and capex deployment required to gain first mover advantage on their 5G and/or fibre networks whilst maintaining and monitoring their existing networks. Many operators are now seeking ways to reduce opex spend on legacy networks and other business units. The success of many TMT Services companies is the pace they can deliver their services and the value add in terms of data visibility and reporting. This will be hard to maintain as they scale and the investment required to do this must be clearly articulated to ensure they continue to meet the needs of customers.

New tech, old products We’re seeing emerging technologies like drones, IoT and AI used to get a foot in the door of TMT companies, whilst exciting, the technology itself is not always the game-changer. It’s the ability to turn data into insight, leveraging these technologies to allow decisions around maintenance and deployment to be predictive rather than reactive. This facilitates better project management and a reduction in network risk. These are key to creating customer value in the longer term. Investors will need to look beyond the current use cases and innovation in tech to get a firm grip on the potential of any target company.

Recurring revenue services

Consolidation and associated M&A deal flow is driving much of the growth in the services market; however, these revenue streams are often one off and transactional. Investors should be asking management teams how they plan to evolve their revenue recurring services. Helping the team to identify a credible solution, will provide significant opportunities to establish relationships, consolidate the business and successfully scale. Helping management teams to fully articulate the value of offering is crucial to achieving this.

Public sector initiatives

Finally, ambitious plans such as those to reduce the digital divide by improving rural connectivity are opening the door to a more receptive end customer. As Telcos seek to provide connectivity to areas with difficult unit economics (often as part of a subsidy or regulatory agreement), the internal teams are seeing the value add of the clarity and flexibility provided by specialist network design, maintenance or inspection providers.

Please speak to Charlie, Simon or Mike if you would like to hear more about our work in this area.

Charlie Mundy, Core team

[email protected]
44 7853 430630

Email Solomon

Simon Hemsley, Partner

[email protected]
+44 7957 340534

Email Simon

Mike Callow, Partner

[email protected]
+44 7894 594 500

Email Mike

Financial services consulting: opportunities and challenges for PE

We’ve helped investors figure out where to find value across many subsectors of financial services – investment platforms, FS tech, financial advisers, fund services, and private client services/trust services, in the recent past.

Growth and change in the FS market means there’s an interesting investment opportunity in financial services consulting services. These businesses are benefiting from positive host market growth drivers (e.g. ongoing regulatory change, need for digital transformation, growing product/service complexity, need for data analysis & insight, senior manager conduct rules) by delivering services (& increasingly the tech) to solve those challenges for clients.

There are value creation opportunities for mid-market PE in FS consulting through both organic growth (through land & expand in customers and hiring from larger firms) and buy & build opportunities.

Host market complexity drives the need for external expertise

Like its host markets, financial services consulting is fragmented – by function (e.g. compliance), by subsector (e.g. banking or wealth management), by customer type (e.g. financial adviser or investment platform), by regulation (e.g. PRA or FCA), and by jurisdiction (e.g. EU27 countries still have many local regulations).

Given the complexity and breadth of requirements, customers often to turn to consultancies for their expertise and capacity. The reality for many is doing this in-house is difficult and complex and ‘do nothing’ is not an option (‘do badly’ is more likely!).

How to grow an FS consulting firm

There are three broad approaches to growing an FS consulting firm;

  • Functional: Focus on the core thing you are good at (e.g. regulatory compliance) and only do more of that, perhaps moving into adjacent subsectors or following your customers round the world (e.g. if you do digital transformation work for the London office of a bank, you can probably do the same for its NYC office).
  • Sectoral; Focus on the core sector you know lots about (e.g. wealth management) and expand your service lines to cover the many things your clients need help with (e.g. digital transformation, regulatory advice, financial crime reporting, KYC/due diligence, US tax reporting … it will be a long list).
  • Cross-sectoral/cross-functional; Depending on your starting point, try and do all of the above – if you can advise on regulatory compliance for an investment platform, you can expand to do that for a financial adviser, and then maybe the financial adviser needs some help with digital transformation, and so on.

The above requires a good platform that has an ambitious management team – which is always the challenge, given the many smaller players plus lots of trade buyers keen to expand.

Investors should also consider the opportunity to overlay technology on a lot of the services offered, to improve the service to clients through data & analytics, but also automation to help staff deliver them more efficiently. The consultancy may also deliver its own tech or sell/implement third party tech, like trade surveillance or monitoring impacts of new regulations.

Buy & build or hiring or both

The buy & build opportunity is driven by how hard it is to build a services business. Particularly now, with significant investment in tech and data analytics required to service clients. Also, FS consulting businesses are typically set up by people spinning out of much larger firms – at some point, many will realise they need to figure out their succession plan, or otherwise see the value in bolting on to a bigger platform – they can realise some £ and go back to doing what they want to do – helping clients.

The hiring opportunity is also interesting – FS consulting is one of many where smaller firms shelter under the price umbrella of the big consulting firms (Bain, Accenture, etc.) or the Big 4 accounting firms. The pandemic has accelerated the rate of burnout of staff in those bigger firms, so there is an increasing opportunity for smaller firms to recruit high quality staff looking to leave these big firms. The smaller firms then are able to deliver work of a similar quality to the big consulting firms, and offer a better service (as they can get closer to clients) but at a lower price. FS consulting is also very much relationship-based, so new hires will bring new clients (and potentially new staff) to help deliver the work.

Key reasons why growth is hard

While the market drivers are robust, FS consulting has long sales cycles which can be tricky to navigate. Buying decisions are often triggered by the appointment of a new CXO, a change in regulations, a new service line, or a change in systems. Developing a sales and marketing strategy given the inherent unpredictability of demand is a challenge for management teams and a potential headache for investors.

The success of many boutiques is due to their depth/strength of specialism, and their seller/doer model which maintains close relationships (important both for sales to clients and for attracting high quality staff), but both are notoriously difficult to scale – you need to hire people with relevant skills & experience and commitment to client service, which is what everyone else wants to do too. Technology solutions make client relationships stickier yet require significant investment and development time.

More information

Armstrong has helped many investors work through investment opportunities in financial services, and there is much more we can say about FS and FS consulting in particular – if it’s of interest, we have a short presentation that goes into more detail on the above themes. Please contact Simon or Solomon to find out how we can help you.

Simon Hemsley, Partner

+44 7957 340534
[email protected]

Email Simon

Solomon Ishack, Senior Consultant

+44 7943 036 633
[email protected]

Email Solomon

Armstrong supports LDC’s investment into Aspire Technology Solutions

Armstrong is pleased to have provided sell side CDD support for LDC’s significant minority investment into Aspire Technology Solutions, in a transaction which values the business at £85m.

Aspire is one of the fastest growing IT managed service and cyber security providers in the UK and was launched 15 years ago by CEO, Chris Fraser. The company now has multiple offices in locations including Gateshead, London and Stockton-on-Tees, and employs more than 200 people.

Aspire is currently delivering plans to create more than 150 North East jobs across its recently opened HQ, based on the site of the former iconic Baja Beach Club at Gateshead Quays, and a new base at Fusion Hive, a business and innovation centre based on Stockton’s Northshore.

With a large network of UK customers, Aspire delivers leading technology solutions across a range of applications including cloud, connectivity, voice, technical support, and cyber security. Its full fibre network provides bandwidth speeds of up to 100 gigabits per second – some of the fastest connectivity speeds available in the UK.

The business has scaled rapidly with revenue rising to £30m in the last 12 months of trading, growing more than 48% over the past three years.

LDC’s partnership will support Aspire’s management team, led by Chris Fraser, to pursue organic growth and acquisition opportunities. The management team is aiming to broaden the business’ suite of services and expand further into markets across the UK.

Armstrong provided full scope sell side due diligence, including a specific value creation module to help LDC and management define Aspire’s growth strategy, focused on geographical and service development.

Chris Fraser, Aspire CEO, said “We enjoyed working with Armstrong and the team throughout the process due to their thorough and constructive approach.”

Mike Callow, Director at Armstrong Transaction Services said “Aspire is a great business, and we look forward to seeing it go from strength to strength. Congratulations to Chris and the team at Aspire as well as the other advisors involved, it was a great team effort.”

To find out Armstrong’s views on opportunities in the technology sector, please contact:

Mike Callow

+44 7894 594 500
[email protected]

Email Simon

Magnus Hedberg

+44 7988 121 458
[email protected]

Email Magnus

Ifan Dafydd

+44 7792 158 738
[email protected]

Email Ifan

Industrials 2022: Q&A with Stephen Royle

Matt McNally speaks to Stephen Royle, Armstrong specialist with expertise in both Industrials and Aerospace.

Impact of COVID-19

“It’s allowed businesses to look at the whole picture and think about how to move forward in the next 5 to 10 years.” Stephen Royle


In the last 18 months, COVID-19 has had a big impact on the industrials sector as a whole. How do you think it’s impacted the way companies in the sector are thinking about the future? For example, is tech playing a greater role, and how are they adapting to supply chain issues?


The pandemic has been a double-edged sword. It’s been tough but it’s given certain sectors the opportunity to focus on digitalisation, and what we’re referring to here is the Internet of Things (IoT). A lot of the technologies have been around for some time, but the uptake wasn’t near the pace we’ve seen over the last 18 months. It’s allowed businesses to look at the whole picture and think about how to move forward in the next 5 to 10 years, in line with their strategies. The pandemic has also created a more collaborative environment; it’s helped companies drive out costs, become far more efficient and better at planning how their strategies will evolve and accelerate.

Digitalisation, IoT and Industry 4.0

“The opportunity is for those companies who not only have the digital ability and the smarts but can also integrate AI as well. It becomes a self-learning, self-perpetuating thing.” Stephen Royle


What are the current areas of focus within digitalisation?


If you go back 10-15 years, there was a drive towards automation. Automation is a generic term and now it’s a more focussed move towards the digitalisation of processes, which encompasses a lot of hardware and software. You’ve got increasing numbers of sensors and the ability to integrate AI which creates an optimum environment for becoming more efficient and driving out costs.

If you look at the software side of things, there’s been a massive boom in the security side. You’ve got different layers of security and the way the protocols are integrated means you can communicate machine to machine. That data is then interpreted to gain even greater efficiencies and this drives the hardware sector. For example, if you have a variable speed drive in a pump, you now have embedded sensors and artificial intelligence monitoring the piece of kit as well as it doing its job. It’s relaying that data to pick up all the little idiosyncrasies that go on within that environment. The hardware has changed to integrate the software, and the software has changed to increase and heighten security and importantly improve performance.


Does this focus on optimising the manufacturing environment mean that improving the manufacturing processes themselves is taking a backseat?


That’s true to an extent. IoT is across all environments and impacts everything we do and everywhere we are. It’s basically the integration of sensors and processing the data that comes from them, it’s all about connections. It’s not just about picking up issues, there’s also a drive for efficiency. Once you start to spot the inefficiencies that are in your production process, you can work out ways to improve that process by eradicating errors. This is smart manufacturing. When you talk about ‘smart’ within an industrial environment, it means to improve the quality and speed of your process manufacturing.

On top of that, you’re gaining invaluable data to feed into your R&D. For example, once you’ve worked out that a process is costing an extra 10 to 15 seconds per unit you will want to enhance it. You will ask your manufacturer to provide more data and move to a point of predictive maintenance. Soon, you get to a point where the system is starting to learn of its own volition.

A really big thing in industrial processes at the moment is how you can become more efficient. In the past the attitude was, ‘if it isn’t broken don’t try and fix it,’ but that has changed and they will fix and replace. What you’ll find is it will become a natural process, rather than a driven process of a conscious decision. Manufacturers won’t wait for failure.


Where are industrial sectors on the digitalisation adoption curve and are there particular sectors that are frontrunners?


We are in the Fourth Industrial Revolution and that is digitalisation. You can look anywhere and see that digitalisation is integrated within our society as a whole and that level of digitalisation is just getting smarter and better. It’s hard to know where we are on the adoption curve, because normally you have an endpoint and this doesn’t. The environments that are growing the fastest in this sector are mainly driven by the large corporations, like Amazon. In the past, superior technology came from aerospace or the defence sector, now it’s coming from commercial environments. That’s because they can move quicker, they have the investment and importantly it’s all that they do; they develop smart technologies and ecosystem environments.

To pick out one sector is difficult. Two high growth areas are cyber security and areas capable of operating across multiple platforms. If you go back 10 years, industrial manufacturers would have their own protocols which made communication between machines difficult. We’re now seeing a flattening out of that playing field with a single line of protocols, everything can communicate with everything. The opportunity is for those companies who not only have the ability and the smarts, but they can also integrate AI as well. It becomes a self-learning, self-perpetuating thing.

For specific sectors, I would probably go with those that are in the electronics and electronics sub-assemblies environments that are integrating sensor technology and then further down to the integration of AI. On top of that you’ve got to house the data and that data needs to be secure and accessible. That’s another environment that is growing massively, data centres. If you can extrapolate that data, learn from it with AI and then use it for redesign or new R&D; that’s a really strong position to be in.

Industrials today encompass huge amounts of smart technology and digitalisation. You can’t survive in an industrial environment without adopting some form of smart technology that integrates into the IoT, you just won’t survive.

Rise of the data specialists

“It’s almost like we’re moving to a consortium environment.” Stephen Royle


Often the interpretation and insight from data is something companies are also looking for from external providers. Is this the case for industrials or does in need to be done in-house because they’re the people who are on the ground and are going to be focused on driving efficiencies, what they can do to improve production etc.?


A lot of these organisations are now looking for providers that are going to inform them of what they’re looking for and give them realistic solutions to it. The reason is a lot of those smarts have gone from in-house. They’re focusing on the job in hand and their core competencies. These environments are looking for specialists that can come in, interpret their data, tell them what’s really going on, tell them where they’re efficient, and then put forward processes and plans for improvement.

It’s an interesting sector, 10-12 years ago someone like Siemens would sell pieces of kit and an additional support package alongside it, that was their value add. Over a period of time, companies didn’t want Siemens coming in and interpreting their data because it cost three times as much, and often they’d come up with a recommendation for further Siemen’s technologies. Businesses are looking for independence.

They want their advisors to be industry specific and who know their sector inside and out. They want people who come to the table with this is what you’re going to need to do and you can buy it from X, Y and Z. It doesn’t end there, they want them to come forward with complete proposals and then be able to implement it, manage the installation and measure the efficiencies so that they can demonstrate how much money they’re saving.


Sounds like we’re going down the route of consultancy and professional services into industrials, rather than purely the technology. It’s about the design, the implementation, the technology you need, how you interpret it, etc. My immediate question around all consultancy businesses is, to what extent do you think those businesses can scale?


Number one is you need to be very specific, almost niche. But bear in mind that niche nowadays means in the whole IoT environment, you can cross over into multiple different sectors. Your smarts can actually be appreciated in another environment, there will be natural crossovers. On top of that, it’s almost like we’re moving to a consortium environment. There are the people that understand the technology, who have the smarts and they can go in and interpret for the businesses in whatever field that may be. Then there are the practical aspects like the hardware involved and software development. A lot of that isn’t going to be governed and held by a consultancy. They will take a consortium approach and be aligned with two or three other software houses or hardware houses and package it up for their clients as a complete solution.

The benefit of that is twofold, firstly it’s managed by the consultancy, so there’s one point of reference and secondly, you’ll be getting the latest and the smartest technologies that are available. What you tend to find is the lower tier suppliers are much more agile. When you start dealing with tier 1s, you’re talking a lot more money, they come with prepacked solutions and they keep their smarts in-house. Effectively by going further down that field and using the consultancy consortium approach you get more. They’re able to do the measurements, set the benchmarks, spot inefficiencies and tell you what you need to be doing, whether it be hardware or software. You can pay them manage those projects, implement them and use them to monitor as you go forward. I think the days of being a one trick pony as a consultancy are gone.

What they are looking towards now is how to diversify and add more value into that process.

Challenges for technology adoption

“I would say that in the past few years, we’ve probably doubled levels of adoption. And it’s only going to continue.” Stephen


Are there any threats or inhibitors to the continued adoption of this sort of tech?


I think up until two years ago, there was fear of change. Industrials has always had the philosophy of ‘if it ain’t broke, then don’t try and fix it.’ Whilst people had been investigating these technologies, the barrier was when to implement them, how to implement them and what the impact of that implementation would be. In the past two years that’s been removed because people had a lot more time and space to consider how to move those things forwards, especially having been hit hard financially. They’ve had to look at ways in which they can improve efficiencies and their bottom line. It’s as simple as that.

It was also a possessive environment and there was fear about data being elsewhere, whether sitting in the cloud or a third-party data centre. That has changed now. The level of support that’s been shown and demonstrated by those environments is something that’s more globally accepted. We do it on a daily basis in our own personal life, so why wouldn’t we in a business or industrial environment? That whole closed environment has been opened right up, and a lot of that is because the fear factor has been removed.

We’ve also got a different generation that’s coming through and this is their world. They’ve grown up in a digitalised environment and the fear of digitalisation is gone. The benefits to efficiencies and the bottom line have been proven time and time again and you can’t ignore that. Companies need to be in an environment where they can compete, be profitable and stay ahead of the market trends. Understanding market trends as what’s happening in your environment is the IoT. As soon as you put a sensor on something you’re able to start anticipating what’s happening in the future.

A good example is the defence environment, it has always been incredibly closed door and everything was held by the MoD. Now the commercial environment is further ahead and leading the way. If you’re in the defence sector, the first thing you do is go out into the commercial environment and see what’s available and, as long as you can get it secure, then there isn’t an issue. They’re now pushing much further down that chain into smaller technology specialists because it gives them an advantage and drives down their costs.

I think there’s been a degree of failure to adopt because there have also been cost inhibitors. That’s no longer the case and that fear of losing heads is not there either. If you look at the environment that we’re in now, headcount is increasing. Fear, siloed thinking and cost were the previous inhibitors, I don’t feel that they’re there anymore.


It sounds as if we’re getting to the stage where companies can’t afford not to do it or they risk being left behind?


Effectively, yes. If your competitors are embracing digitalisation, and they’re in your marketplace, who would you go with? You’d go with the one that’s more secure, the one that’s improving efficiencies, lowering prices year on year and improving quality. This isn’t a race to the bottom either. This may be efficiency driven, but it’s to get to a desired end result and remaining ahead of the game. I would say that in the past few years, we’ve probably doubled that level of adoption. And it’s only going to continue.


Is ESG and specifically climate change a factor as well?


They’re very much on the agenda. Climate change will always drive efficiencies and efficiencies will help climate change. There are carbon targets and obviously this is an area that a lot of processes are focussed on because otherwise you get fined. It’s as simple as that. There’s a flip side of course; when you create vast datasets that need to be stored in data centres, you increase energy consumption. It’s a balance between the two. Either way if you’ve got a whole bunch of sensors and you’re able to interpret that data, you’re going to be more efficient by nature.

There are still certain pieces of kit that you can’t swap out, they’re too integral to a process. When you’ve got a failure that’s when you get the new one that’s more efficient. That will start to prove itself and that’s when a lot of process engineers start looking at it and think how to increase levels of efficiency and drive down costs even further. The rates of return can be phenomenal.

If you look at the lighting sector, 10 years ago, LED lighting was really expensive, now it’s not. The lighting sector has probably bottomed out as much as it possibly can do. But then you’re looking at the next generation of lighting and that’s actually going to be charged at a little bit more of a premium but ultimately your lighting bills and your return on investment on those was super-fast. In some instances, in seven to eight months. You’re going start to see the same thing in the industrials environment, and it’s already here and it’s already been taken up.

Please speak to Matt if you would like more insights on the industrials sector.

Matt McNally

+44 7894 736 523
[email protected]

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Creating value from the enduring attraction of MSPs

In the 500th edition of Real Deals, Armstrong director Mike Callow explains how the firm’s Managed Service Provider (MSP) framework helps PE investors and management teams create value in a considered, strategic way.

Real Deals Armstrong MSP

Mike Callow, Director

+44 7894 594 500
[email protected]

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Armstrong supports Graphite Capital’s acquisition of Opus Talent

Armstrong is pleased to have provided full CDD support for Graphite Capital’s acquisition of Opus Talent Solutions, a global recruitment business, backing a management buy-out from the company’s founder.

Opus is based in Bristol, has more than 1,000 clients in over 50 countries, and specialises in the technology and renewable energy markets. Armstrong analysed the market and competitive dynamics in Opus target sectors and geographies (UK, USA, Australia), to understand the firm’s growth potential in its end markets, and the opportunity for its technology developer offering.

We conducted in-depth interviews with clients, candidates, and consultants to get a 360-degree view of the firm’s operations. Our work also included analysis of key internal KPIs, and development of base, upside, and downside business plan cases.

Rachael Baker at Graphite Capital said “We are pleased to have completed our investment in Opus Talent Solutions with the support of Matt, Simon, and the Armstrong team. They provided comprehensive and insightful commercial report, which was key to supporting our investment hypothesis. The report will also be a useful framework for thinking about how we can support the company’s ambitious growth plans.”

Simon Hemsley, Director at Armstrong Transaction Services said “Opus is a great business, and we look forward to seeing it go from strength to strength under Graphite’s ownership.”

We think there are still plenty of opportunities in the recruitment sector, as business continues to rebound from the pandemic – see our thoughts on PE investment in our Recruitment – Heating up again for Private Equity article.

Please contact Simon Hemsley or Matt McNally to discuss Armstrong’s views on opportunities in recruitment in more detail;

Simon Hemsley, Partner

+44 7957 340 534
[email protected]

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Matt McNally

+44 7894 736 523
[email protected]

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What can we expect from 2022?

2021 was a successful year for the mid-market and looking ahead deal flow is in rude health (deal volumes are +60% YoY by some measures) and these conditions show no sign of abating in the short-term. However, Omicron and the latest restrictions will inevitably impact on sectors such as travel, hospitality and events.

What can we learn from 2021?

  • Deal volumes and valuations have strengthened throughout the year, driven by continued capital flow and companies seeking investment (often prompted by a post-Covid realisation that ‘phew, that was close’). As Mike Callow (Head of Technology) and Simon Hemsley (Head of Business & Financial Services) discussed with Real Deals in their article, ‘Increase your exit multiple by getting the expansion strategy right’, these conditions could be with us for some time…
  • Coming second is easy. Early triage by investors is essential to avoid wasting time by coming second in hard-fought auction processes.
  • Buy & build is a pragmatic, low-risk way of deploying capital in this market, which Simon Hemsley discussed with Real Deals during the summer.
  • A broad range of sectors are in full ‘revenue growth’ mode. Industries that support top line growth are benefitting, e.g. recruitment, training, digital transformation. A more detailed discussion of this can be found in our article, ‘Recruitment – Heating up again for Private Equity’.
  • Consumers are striving for a return to normal, switching spend to social experiences, and some lockdown boomers are busting (want an almost-new Peloton bike anyone?). But as the year came to a close, the optimism and relative normality of the last few months was starting to wane.
  • The Great Resignation – while an overused catchphrase – is benefitting small, nimble, values-driven business at the expenses of larger corporates. This is a competitive advantage that has not been afforded SMEs for several years.
  • Wage inflation and The Great Resignation is resulting in knowledge work automation, a new growth driver for digital transformation. Mike Callow discussed the consolidation of MSPs in, It’s MSP season again in the private equity mid-market. What’s behind the wave of deals?
  • A value generation plan is required pre-deal. High valuations require a value generation strategy, a detailed action plan, and advisers to be identified at completion, ready to deploy in the first month of ownership. This was a central theme at the Real Deals Diligence Roundtable discussion in the summer.
  • Pricing – historically a surprisingly underused lever – is becoming increasingly important to help businesses adapt to inflation, rising input costs and some of the disruptions of the last two years.
  • Diligence continues to evolve; digital and IT are now well-established, and ESG is gaining prominence. Peter Cookson, Managing Director, discussed this in his discussion of consumer supply chain trends, Retail – taking stock of the supply chain’.

So, what can we expect from 2022?

  • Across Europe, Covid restrictions have returned, which will dampen domestic demand and inbound tourism.
  • In professional services, the shift to hybrid working is here to stay. The challenge is to balance higher efficiency with lower effectiveness, while avoiding staff burnout and churn. Onboarding and innovation also need care and thought to redesign for a home/office location mix. Providers of associated support services and systems will benefit – providers of services as diverse as digital transformation and people development will be in demand in 2022.
  • The digital transformation of wealth management will continue apace. IFAs and wealth managers will further automate manual processes, reduce cost-/time-to serve, and focus staff on providing high-touch client services. Again, providers of these supporting services and systems will benefit.
  • Technology MSP dealflow has legs. MSP service offerings are evolving at a pace, is your MSP’s service offering right for its target market (not least in the security segment, in full land grab mode)? What should its roadmap look like and can you accelerate it with M&A? How can it take advantage of the convergence of MSP domains like IT, comms, connectivity, networking and security? How far up the value chain into strategy, transformation and applications could (or indeed should) it go?
  • Low code is causing ripples. Low code is everywhere and indeed, some MSPs are leading the charge. The bar to using custom applications and integrations is falling quickly, and management teams across PE portfolios need to take advantage. See Mike’s article, ‘Low code; a hyped technology which is already delivering for the mid-market’.
  • Time for private cloud to have a moment in the sun? The cost of public cloud workloads can be unpredictable, and occasionally eyewatering. Modern private clouds (not hosting!) can offer the right balance of cost and performance for enterprises and SMEs. MSPs with offerings that balance cost/benefit for SMEs should thrive.
  • Microsoft is everywhere, other ecosystems are available, and some are rather attractive. The Microsoft channel continues to be a great hunting ground, but good quality deals can be hyper-competitive. The lower mid-market has a golden opportunity to bring through smaller, innovative, specialist partners to keep the ecosystem healthy. Investors need to ensure that the vendor is the right horse to back.
  • Overseas travel will continue to struggle given Omicron-related restrictions. However domestic tourism will rebound strongly as people take fewer, longer, higher-priced UK holidays. Secluded, super-premium resorts and small-group escorted tours will benefit.
  • Trade events will roar back to life – it is a matter of when not if. The tradex/confex model will remain at the sector’s heart, buttressed by complementary profit centres such as training, software, consultancy and direct buyer/seller introductions. A portfolio with multiple products and channels is now essential to achieving the highest valuations.
  • The property market, already hit by labour shortages and input price inflation, will experience the first interest rate increases for 14 years. Operators in the built environment need to adjust to ensure operating margins are protected. Use of improved digital systems and building techniques such as modular construction will increase.
  • In the industrials sector, operating conditions will become a little easier, but only in places. Wage inflation will be sustained, and energy and materials input prices will fall slightly from Q4 2021 highs.
  • Fattening of supply chains will remain a feature of goods importing throughout 2022, perhaps longer.
  • Ongoing investor interest in TICC (testing, inspection, certification & compliance) and fire & security will spread to ESG services and renewable energy.

Please speak to myself or a member of the team if you would like to find out more.

Tom Raymond, Partner

+44 7762 386 216
[email protected]

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