We stimulate growth through acquisition
We focus on acquiring small to medium sized businesses that will support and supplement our organic growth by enhancing our existing offering or market reach.
Selecting acquisitions for growth
Acquisitions have consistently played a key role in stimulating our growth.We seek acquisitions that will either strengthen and enhance our current position or provide a foothold in a new market segment where we can generate further growth. For example, we have entered markets such as education, life and pensions and financial services with an initial acquisition, then swiftly built significant capabilities and generated good returns through a mixture of further acquisitions and contract wins.
We now have a strong presence in nine target markets where we continuously look to acquire businesses that will strengthen our market positions, bring complementary skills and services and provide opportunities to create further economies of scale, or expand our current reach.
To stimulate growth we seek target acquisitions that:
- Have operations and customers in the UK and/or Ireland
- Fit with our strategy and core competencies
- Generate sustainable, quality revenue.
In 2007, we spent £114m on 12 acquisitions and investments. While continuing to be highly selective, we anticipate a similar volume of small to medium sized transactions in 2008.
Acquisitions and investments in 2007
| Company |
Service |
Division |
Value (£m) |
| Spectrum |
Software |
Professional Services |
1.75 |
| HarryWeeksTravel |
Travel admin |
Integrated Services |
21 + 12 |
| CPFR Solutions |
Software |
Professional Services |
3 + 10 |
| Global Fund Administration |
Fund admin |
Financial Services |
2 + 2.5 |
| Global Fund Administration |
Fund admin |
Financial Services |
2 + 2.5 |
| NHS Partners |
Resourcing |
HR Solutions & Property Consultancy |
1.9 + 0.9 |
| CMGL |
Insurance |
Insurance & Specialist Services |
32 |
| MVRA |
Insurance |
Insurance & Specialist Services |
1.3 + 1.6 |
| TMG* |
Legal services |
Insurance & Specialist Services |
8 + 8.5 |
| PwC CITrust Business |
Trust services |
Financial Services |
12.75 |
| HighamDunnett Shaw |
Pensions admin |
Life & Pensions |
15 |
| Aspen |
Pensions admin |
Life & Pensions |
7.4 |
| McKeags* |
Legal services |
Insurance & Specialist Services |
7 |
| *investment |
Applying rigorous criteria when selecting targets and agreeing purchase prices
Potential acquisitions are brought to the Group by external consultants or, increasingly, by people within the Group. We are highly selective: in the past year we assessed some 100 acquisitions and investments but proceeded with only 12. Due diligence is undertaken at both Group and business level. All acquisitions are assessed and agreed by the Group Board.
Capita has a track record of acquiring and successfully integrating small to medium sized businesses that stimulate growth. We tend to select acquisition targets that are:
- Privately owned
- Too small to interest the private equity market
- Not in an auction – we aim to acquire without competition
- Attractively priced, with scope to add value for shareholders.
This enables us to negotiate sensible purchase prices and terms, and so generate good returns for the Group.
Integrating acquisitions successfully
We have substantial experience of integrating acquired businesses and achieving synergies with our existing operations. Stringent due diligence, before and after acquisition, enables us to set clear targets for growth, integration benefits and profit. A dedicated project team manages the transition, rigorously applying the processes we have developed to bring financial procedures, information and communications technology (ICT), HR, legal, compliance and marketing quickly into line with our standards, using Group systems and resources where appropriate.
Acquiring only small to medium sized businesses enables us to integrate the new operations into our existing business infrastructure with little disruption and generally allows us to generate value faster.
Trustee Services
Adding value through acquisitions
In 2000, our trust administration business comprised just eight staff acting as trustees for debentures & loan stocks issued by customers. Revenues were £1m. In May 2001 we bought Royal & Sun Trust Companies, and over the next few years went on to consolidate our position in the market with the acquisitions of Channel House, Stirling Trustees, PwC Channel Island Trustee Operations and Niewenhuis Services for a total acquisition spend of approximately £40m. Today we have over 260 staff working out of offices in London, Dublin, Jersey, Guernsey and Amsterdam, with expected revenues of £29m in 2008.