Pitch Best Mid Cap Deal 2023: AddSecure Group acquires Clifford Group

Stem op deze deal via de stempagina: Mena.nl/genomineerden-best-mid-cap-deal-2023

Name of the deal: Sale of Clifford Group to AddSecure Group
Date announced: 4-9-2023
Date closed:  15-9-2023
Published value: € 50 – 100 million
Buyer(s): AddSecure Group (AddSecure Benelux HoldCo B.V.)
Target(s): Clifford Group
Seller: NewPort Capital, Founders Management, team members

Involved firms and advisors
Involved firms and advisors buy side:
Legal advisor: Houthoff
Financial DD advisor: PwC
Tax advisor: PwC
Commercial DD: Roland Berger
Technical DD: Techminers

Involved firms and advisors target:
n/a

Involved firms and advisors sell side:
Financial Advisor: GB Bullhound
Legal advisor: DLA Piper, CORP.
Financial DD advisor: KPMG
Tax advisor: KPMG, JSA Tax Consultancy
Commercial DD: KPMG
Software DD: SIG

Pitch
Brief description deal / Deal outline
AddSecure, a leading European provider of secure IoT connectivity and end-to-end solutions has acquired Clifford Group, a leading multi-brand telematics company providing certified, advanced mobile security and connected mobility solutions in the Benelux.    

Why should this deal win the Award for Best Deal Mid-Cap?
The transaction has multiple facets which make it the best deal in its size bracket:

1. Skilled execution across a wide bidder landscape, both in terms of geography as well as types of interested parties such as PE’s, strategics and PE-backed platform companies with a successful sale realised to a PE-backed strategic bidder
2. An attractive purchase price which rewarded the sellers for the value that has been created, both autonomous and acquisitive
3. A relatively complex deal in the constellation of the broad ecosystem in which Clifford Group operates and which includes OEM car manufacturers, satellite communication providers, insurance companies, fleet owners and multiple sales channels ranging from factory fitted solutions to aftermarket installations and proprietary software offerings.
4. The deal confirms the realised synergies stemming from key bolt-on acquisitions (Faringwell and Belgium-based Traxgo) within the Clifford Group, especially the cross-pollination between Mobile Security such as stolen vehicle recovery (SVR) systems and Connected Mobility, such as fleet management software. The Mobile Security branch furthermore has expanded through M&A facilitating a dually oriented sales strategy based on exclusive factory-fitted contracts with for example Porsche in addition to universal aftermarket installations, making the Clifford Group the clear market leader in SVR in the Benelux
5. Clifford’s management team is showing continued commitment to the business underpinned with a significant equity reinvestment and key placement within AddSecure’s corporate structure, securing Clifford’s culture and prospects for all current and future employees.

Deal rationale:
During NewPort’s holding period Clifford has become, mostly through key strategic acquisitions and subsequent integration, a data-driven vehicle IoT platform. Vehicle data is utilised for a broad range of solutions such as fleet management, driver behavior analysis and reducing environmental footprint (collectively called Connected Mobility) and preventing vehicle theft and increasing chance of recovery of stolen vehicles (collectively called Mobile Security). Leveraging real time vehicle information in this manner has provided Clifford a competitive and technological advantage over its peers. Clifford partners with parties like Vodafone Automotive, Porsche, Lamborghini and several other premium carmakers.

In AddSecure Clifford has found the ideal partner for the next phase. The company will be able to benefit from AddSecure’s IoT-capabilities in order to further refine its own services. Additionally, the broad European footprint of AddSecure will act as a springboard to aid Clifford’s international expansion ambitions. Through the acquisition, AddSecure enters new IoT verticals, combining connected mobility and mobile security solutions, and establishing a new business unit, Smart Mobility. This further strengthens AddSecure’s position as a leading provider of IoT connectivity and end-to-end solutions in Europe, helping new and existing customers to manage their mobile assets. AddSecure can leverage Clifford’s market-leading mobile security and connected mobility expertise and platforms not only for continued growth in the Benelux market, but also for expansion into new markets as well as into adjacent non-automotive verticals. Furthermore, the deal will also create cross-sell opportunities.

What is the impact of this deal for the company?
Clifford will become the launching platform for the new Smart Mobility vertical within the AddSecure Group. Mr. Huibjan Braafhart, CEO of Clifford Group, will head the newly created Smart Mobility vertical in AddSecure and will as such be part of AddSecure’s corporate management team and report directly to the CEO of the group. Therefore, Clifford with its people, processes and products, will form the basis of a new vertical in this European-wide IoT conglomerate. Clifford will make a significant mark on AddSecure’s further growth path and allow ample opportunities for its employees to grow their careers further within the broader group.

What is the impact of this deal for the direct stakeholders?
First and foremost, the employees and clients of Clifford will be able to continue their existing relationship with the company. The employees have all contributed to the development of the company and under AddSecure they will be able to further develop their careers and continue to be a part of supplying the best telematic solutions in the Benelux. Clifford’s clients will be able to enjoy a wider service offering as Clifford will co-develop products and solutions with AddSecure’s IoT-capabilities without losing any of the security that Clifford has provided them up until now. Car manufacturers collaborating with Clifford will also enjoy the larger footprint of AddSecure and the possibilities this brings in the development of Smart Mobility products.

Management has started a new phase with the entire key team reinvesting in the combination. They are all happy to continue be a part of Clifford whilst also to explore new avenues of growth in an organisation with a much larger footprint, in terms of geography, technology and product offering. They are also looking forward of being part of a shareholder constellation which also includes Castik Capital.

The remaining sellers all have realised their investment in Clifford, including all equity and debt instruments provided, fully in cash without any conditional element based on Clifford’s performance.

What is the impact of this deal on society?
Clifford has always been in the business of making lives safer and has provided this as an undercurrent for all its solutions offered. The fleet management platform, including data on driver behaviour, helps fleet owners to lower emissions across their fleet. This leads to lower fuel consumption, longer asset life and an improvement of the eco-footprint of a vehicle fleet. On top of that, driver safety is improved as the monitored data help set performance indicators aimed at increasing road safety.

The track-and-trace solutions meanwhile help give peace of mind to clients and additionally brings down car theft figures. This in turn lowers premiums and damages across the (car) insurance industry. The combination with AddSecure allows these goals and solutions to be further developed and rolled out across a wider reach. The group will continue to aid road users in bringing down their environmental impact and ensuring their safety.

What was most complex about this deal?
As the deal comprises of a cross-boarder M&A transaction with a Swedish based IoT-provider owned by a Luxembourg- based private equity fund with a target company based in Holland and Belgium handling vehicle data across several countries, a number of elements would qualify as complex. On a whole, the transaction was in no way plain vanilla.A telling example of the complexity involved was the transfer of the development of the Intellectual Property located in the Ukraine. Besides the legal and fiscal difficulties of structuring the IP within the new AddSecure structure, a delegation of the Clifford team travelled to Ukraine during the current invasion to meet and liaise with the Ukrainian development team.

Another example includes the firm negotiations on the attractive and large deferred revenue position within the Clifford Group. Especially the Mobile Security business contains substantial advance payments, leading to a negative working capital position which functions as an attractive source of financing now and in the future. Under considerable time pressure all parties were able to reach an understanding of the complex business dynamic and agreed on a fair compensation for sellers.