Leeds-based Renew acquires Excalon Holdings for up to £26m

The Yorkshire-based engineering services group Renew has acquired Excalon Holdings for up to £26m in a deal which allows it to expand into the electricity transmission and distribution market.

Renew said the deal was consistent with the group's strategy of focusing on markets where maintenance and renewals programmes were supported by long-term funding programmes.

Excalon, which is based in Salford, is an infrastructure contractor which specialises in the provision of high voltage infrastructure to the UK electricity sector.

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The statement added: “Excalon has a number of long-term frameworks with electricity Distribution Network Operators ("DNOs") across the UK.

Renew has entered the electricity transmission and distribution market (Photo by Nicholas .T. Ansell/PA Wire)Renew has entered the electricity transmission and distribution market (Photo by Nicholas .T. Ansell/PA Wire)
Renew has entered the electricity transmission and distribution market (Photo by Nicholas .T. Ansell/PA Wire)

"The UK electricity DNO market is regulated by Ofgem and operates in five-year control period funding cycles.

“The initial consideration of £22m has been funded from the group's existing cash and banking facilities.

"Additional consideration of up to £2m will become payable in 2025 along with a further £2m in 2026, conditional upon the vendors remaining with the businesses and specific profit targets being achieved. The RIIO ED2 cycle commenced in April 2023 with the latest determination of funding set at £22.2bn.”

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The RIIO-ED2 price control sets the outputs that the 14 electricity Distribution Network Operators (DNOs) need to deliver for their consumers and the associated revenues they are allowed to collect from 1 April 2023 to 31 March 2028.

The statement added: “Entering this market allows Renew to access both the opportunities in ED2 as well as the upgrade of the grid that is required to support the UK's zero carbon generation and renewables sector.”

Paul Scott, chief executive officer of Leeds-based Renew, said: "This acquisition broadens Renew's exposure to another critical UK infrastructure market, presenting tremendous long-term growth opportunities.

“It is consistent with our stated strategic objective to expand into new complimentary sectors that have high barriers to entry coupled with resilient attributes.

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"This is a highly regarded business with a strong track record in this specialist sector, and I am delighted to welcome the management and staff of Excalon to the Renew family."

The valuation of the business was based on Excalon generating a sustainable EBITDA of at least £3m per annum and the profitability of Excalon is expected to be in line with Renew's current engineering services operating profit margin.

The statement added: “The acquisition will be immediately earnings enhancing for the group and Renew will continue to have a very strong balance sheet.”

The shareholders of Excalon were advised by a team of mergers and acquisition lead advisers from Grant Thornton (Usman Malik, John Whitney, Maria Barnes) alongside legal advisers from Ward Hadaway (Adrian Ballam, Rachael Sykes).

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Renew was advised by Walker Morris (legal) and PwC (financial due diligence).

Renew's activities are focused into two business streams: Engineering Services, which focuses on the markets of rail, infrastructure, energy and environmental. Specialist Building focuses on the residential, landmark and science markets in London and the Home Counties.

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