The Marlowe Model
“The potential offered by the fragmented service sectors that we identify combined with our disciplined approach to identifying complementary acquisitions, quick decision making and the operational improvements we implement, when married with our access to capital and ability to re-invest cash into growth, creates superior returns and provides a platform for significant growth” – Alex Dacre, Chief Executive
Deep industry knowledge: Identify target sectors which fit with the Marlowe investment criteria:
- Businesses in strategically complementary service sectors with good growth prospects which offer the potential to build a strong position in markets that are large enough to accommodate significant growth
- Sectors with resilient growth drivers where businesses provide services which are non-discretionary and often governed by the need for regulatory compliance
- Sectors which the margins are attractive – and can be enhanced through the efficiencies that come with scale and operational improvements
- Sectors in which the need for services is sustained throughout economic cycles and isn’t threatened by technological change
- Fragmented markets where we recognise growing barriers to entry which lay the foundations for consolidation. These sectors are well suited to support growth, over and above the long-term organic revenue growth rate, through acquisition and subsequent integration
- We consider including equity in transactions which aligns the interests of our management terms closely with our shareholders and locks-in our people. In a similar vein the founders of Marlowe have invested in a significant shareholding in the Company
Agile decision-making and entrepreneurial autonomy
- Make investment decisions, change and provide strategic focus, oversee the implementation of operational improvements; build scale and take advantage of the economies it presents: we seek to improve customer service whilst expanding margins and delivering an improved return on capital
- Refine the business model of acquired companies in preparation for further growth. Broaden the service capabilities of acquired companies through organic investment or further targeted acquisitive growth
Operational and financial improvements
- Whilst we fundamentally believe in empowering our management teams and our operational resources are placed close to our customers, Marlowe is not a passive investor in the businesses it acquires. The Marlowe team have a very close relationship with each acquired business and work with its management team to develop long-term strategic plans, as well as having regular input on key decisions, capital expenditure and working capital management. We invest in people, operational systems and improvements in technology all with the aim of improving standards of service, which in turn generates increased organic growth
- Implement high standards of governance, financial systems and controls with the aim of improving visibility, identifying and nurturing our most profitable workstreams and improving operating cash generation
Acquisition-led growth
“We possess the skills to identify good quality, compatible acquisitions which we are able to effectively integrate through carefully implemented programmes”
- Organic investment and swiftly executed, value-enhancing, add-on M&A
- We inject pace into our businesses whilst providing a platform which allows our management teams to focus on profitable growth
- We create value through utilising our resources and re-investing generated cash to accelerate the growth of acquired businesses through targeted add-on acquisitions, often to develop further geographical reach and critical mass or to broaden our capabilities. Potential acquisition targets can include the type of businesses which might be below the radar of both large corporations and private equity houses. We are adept at quickly identifying, negotiating and executing these types of deals
Build business into a top-3 player in its market
- We only enter markets if we can see a clear path to developing a market leading position within that market in the UK and those in which scale and investment can enhance our competitive proposition
Expertise in market consolidation
“A disciplined approach to integration, the removal of duplicated costs and the implementation of strong financial controls results in predictable and improved shareholder returns”
- Bring about efficiencies and leverage economies of scale to build leading positions across the UK
- Our acquisition model is disciplined, based on clear criteria and can be deployed at pace. Our M&A team are responsible for identifying targets and maintaining key relationships. We are in contact with numerous acquisition targets at any one time. We know what it takes to deliver successful acquisitions across the UK service sector landscape and are experts in scrutinising targets and structuring deals before overseeing carefully planned integration programmes and providing close governance of new businesses under our ownership
- Through adding further scale, with add-on acquisitions, we create opportunities for our management teams to realise the synergies between acquired businesses and to implement operational improvements
- Our management teams are proficient in post-acquisition management, restructuring and tight cost-control. Our integration processes are well rehearsed and carried out by dedicated resource
Intercompany collaboration within our Group
- Realise strategic synergies across the Marlowe group which provide a competitive advantage and can further accelerate growth
- We favour entering sectors which share a similar channel to market, in which services are underpinned by regulatory requirements and where our customers can see the logic. This creates competitive advantages: because all the businesses in our Group share a similar customer base, with services usually procured by the same decision-makers within our customers’ organisations, we are able to accelerate our organic growth rate through ensuring that customer relationships are shared across different Marlowe businesses, enabling cross-selling of services across the Group. When successfully executed, this binds our relationships with customers more firmly
- By entering markets which share a similar route to the customer we also ensure that we develop a close understanding of our customers’ needs which equips us well to deliver services to address those needs
- We favour sectors which have, or might benefit from, similar operational methodologies. This enables us to apply many of the same improvement techniques that we have employed in other areas of our Group to drive organic growth
Investment Focus
Our investment focus is on B2B service sectors where businesses provide services which are essential or mandatory, invariably subject to regulation and characterised by consistency in demand. The mission-critical nature and switching costs of these services result in customer stickiness. If we deliver an efficient and competitive service, customers generally prefer not to change provider.
A large proportion of our revenues recur periodically from month to month and year to year and result in long-term, durable customer relationships. Such revenues, with their annuity-type characteristics, allow for good forward earnings visibility and allow us to plan our operations many months ahead.
We focus on service sectors which are technical, specialist and operationally complex to deliver and command attractive margins thanks to the efficiencies and value they add to our customers’ operations. They are invariably outsourced rather than conducted in-house because of this specialist nature, the levels of regulatory compliance which govern them and the need for service providers to adhere to stringent industry standards.
We favour service sectors in which scale can present the opportunity to generate enhanced efficiencies for our customers and returns for our shareholders, and those in which larger, national operators generate pricing power and possess a competitive advantage in winning and delivering business. All the sectors we focus on and occupy offer significant scope for margin enhancement and profit growth.
We will continue to build our Group upon businesses which fit well together and share a similar channel to market along with complementary operational methodologies. This provides our businesses with an intrinsic advantage of being able to share customer relationships across the Group and to implement well-rehearsed operational improvement initiatives.
We focus on markets which are fragmented and exhibit characteristics that are suited to industry consolidation. As we inject pace and build market share through add-on acquisitions and investment in organic growth, barriers to entry grow as the comprehensive service which we can deliver, and the returns we can generate, disadvantage our smaller competitors.
Our Markets
All the spheres in which we operate are complementary: Risk Management & Compliance, Fire Safety & Security, Water Treatment & Hygiene, Air Testing & Quality services are all services which are governed by strict regulation and tend to be procured by the same person or department within an organisation. Our markets have long-term growth drivers: health & safety regulations and their enforcement burden, population growth, urbanisation, insurance requirements, reputational risk & ever-increasing awareness from the public around safety standards results in stricter legislation and places more onus on organisations to ensure the safety of their properties and people.
Total addressable markets size estimated at over £4bn
- Water Treatment & Hygiene: £1.3bn
- Health & Safety: £600m
- Air Quality & Testing: £450m
- Fire Safety & Security: £1.9bn
Risk Management & Compliance
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Air Testing & Quality
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Fire Safety & Security
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Water Treatment & Hygiene
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