MBH Corporation PLC accelerates pace of acquisitions as strategy develops

What it does

MBH Corporation is a buy-in business rather than a buyout specialist.

In short, it acquires well-run companies that have a long track record of success – sometimes in some ‘unsexy’ sectors.

Management is probably not so much looking for the exit as attempting to get to the next level; or is trying to secure the option to sell-up at some later date if it wants.

Crucially, while MBH provides the central administrative functions, the owners then carry on managing their creations.

All deals are done for paper – on an earnings accretive multiple of around five times earnings before interest and tax (EBIT) – and there is a perpetual share earn-in linked to the profitability of the company.

So, the model rewards long-term ownership and commitment.

MBH itself is a British public limited company that adheres to the gold standard corporate oversight of the UK Listing Authority.

How it’s doing

In February, MBH acquired GBS Partners, its first in the food manufacturing sector, its second deal of the year and its third purchase in the USA in the past six months.

The month before, the group added 3Ks Engineering, which was the first company in a new engineering vertical.

The month before, Victoria Gosden Travel (VGT) was snapped up as the group’s 12th acquisition of a busy 2020.

This licensed hire firm joined ADT Taxis in MBH’s transport vertical and boosted the pro-forma revenues of MBH group companies to £104mln for the financial year ending 2020.

In November, deals were struck to buy Academy One Group, a sports education training organisation, and NVQ Nail & Beauty Specialists Training Academy, a provider of beauty training courses, which both strengthened the group’s largest vertical: education and training.

They will form part of MBH’s Acacia Training business, following the acquisition of Learning Wings in June.

What the boss says: Callum Laing CEO

“Boulder Sausage is the latest example of our agglomeration policy of acquiring long-established and successful businesses with exceptional leadership and ambition for further growth,” said MBH chief executive Callum Laing.

“We are very excited about the opportunities in this new Food & Beverage vertical.”

What the broker says

(FRA:MBH) received a price target upgrade from German broker GBC following its four acquisitions at the end of 2020.

GBC said that in its last note (in October 2020) it had assumed there would be only two more acquisitions in 2020, but with the recent activity, has adjusted its revenue forecasts upwards.

Earnings have been trimmed, though, due to the disruption from the COVID-19 pandemic with two lockdowns in the UK and the increased restrictions in New Zealand leading to some contract delays.

The new price target is 164p against 155p previously and is based on the higher sales now expected in future years. GBC also assumes that the delayed construction work comes through in 2021.

“Based on the current price level of €0.38 (34p), which is significantly lower, we continue to give the share a buy rating and see it as clearly undervalued.”