OUR ACQUISITION STRATEGY

Grafenia has a mandate to acquire businesses in the graphics art sector. We’re an experienced, well-funded purchaser. We can meet the needs of serious vendors.

The graphics sector has converged. Printers sell signs. Sign-makers sell websites. Web designers sell printing. We’ve positioned our Nettl formula to take advantage of this convergence. Our strategy is to sell SMEs a full suite of print, promo, exhibition products and web design services. Today there are over 180 Nettl locations in multiple countries. We want to scale further.

In 2016, we announced our plans to acquire sign businesses. We like this sector for a number of reasons. It’s complementary to our core business. It’s highly fragmented. There are multiple acquisition targets. We’ve evaluated many sign businesses. The businesses we have acquired – and our current targets – have been stable or shown growth over the past three years.

Signage is a complementary bolt-on, operating in the same graphic arts sector. Sign manufacturers sell to SMEs – the same client base as Nettl studios. Signs, exhibition and vehicle wrapping is a natural extension of Nettl’s product range.

Our aim is to create a national sign solution capability serving SMEs.

In doing that, we’re looking for 3 distinct types of businesses within the sector.

Our method.

Our strategy is to make acquisitions within a specific commercial location, and this has three steps.

The first stage is to acquire a profitable business, where the owner wants to stay – we call them the “remainer”.

We’ll consider businesses which meet our criteria:

• stable or growing, with track record of profitability in prevailing four or five years;
• minimum turnover of £250,000;
• their top three clients represent no more than 30 per cent of their business;
• gross profit margins above 55 per cent;
• owner’s salary expectation consistent with our Company’s pay structure;
• located in a primary city target location (phase 1) or secondary location (phase 2);
• property tenure flexible (able to relocate within 24 months);
• good cultural fit (management’s business ethos and circumstances i.e. must support rebranding and personal circumstances must underpin / encourage long term commitment).

We evaluate each “remainer” acquisition on its own merits as if it were to remain standalone.

Once we’ve acquired and integrated a “remainer” business, we look for another local business to roll-in. For these other businesses, we target owners seeking to exit – the “leaver”.

Finally, our plan is to consolidate both businesses into a single team, led by the “remainer”. We aim to achieve cost savings by centralising marketing, management information systems, legal, payroll and accounting. We relocate both businesses and rebrand as a Nettl Business Store, in a more prominent location.

Our experience from the first three deals we’ve completed suggests we are able to acquire sign businesses at 2-5x EBIT.

Our method

The criteria for Regional Hubs is different. Regional Hubs are large, self sustaining, highly capable organisations that have the significant manufacturing and production infrastructure to support our network’s large format, display and signage requirements.

We’ll consider businesses that meet the following;

• Located in the UK, either the South East, South West, Midlands or Scotland
• Stable or growing, with a track record of profitability in the prevailing four or five years.
• Minimum annual turnover of £2.5m
• Their top three clients represent no more than 30 per cent of their business
• Gross profit margins above 55%
• Good cultural fit
• High levels of in-house capability across graphics, fabrication and installation.
• Range of printing and cutting machines including flatbed, large format digital inkjet devices, CNC cutter/router(s), finishing machines.

In addition to the core services provided by the business to the existing client-base, post-acquisition, the Regional Hub will provide additional capacity to the broad network of brand partners and Grafenia owned/operated Business Stores across the region.

Do you manufacture something special that has a particular application in our sector, that can be distributed nationwide? It might be LED lighting or built-up letters, or even a software solution – talk to us. We’re entrepreneurs with a wide network of partners in the graphics industry, selling to thousands of end-user clients worldwide – who knows what opportunities your solution might provide.

In January 2017 we acquired ADD Signs in Liverpool. In the first full year under our ownership, sales grew by over 30 per cent and beat our profit target.

In March 2018, ADD Signs relocated from its former home to a 5,000 square foot trade-counter unit in Liverpool Waters. At the same time, we re-branded them as a Nettl Business Store. The Business Store features a design studio, retail display area, meeting room hire and drive-in vehicle bay for installation of graphics. We will manufacture signage in-store and the installation team is based there.

The next objective for this business is to roll-in a “leaver” business. We are evaluating potential targets.

In July 2017 we acquired Image Group Limited. With £5.5 million turnover, this was a much larger business than our typical roll-up target. However, it was always our aim to centralise some sign and display production. We brought these plans forward.

In the first six months under our ownership, Image Group has integrated well. We’ve merchandised and promoted a range of display products, manufactured by Image Group and we sell them via our Nettl and printing.com partners. The next objective for this business is to extend our product range to include installation services and to act as a signs hub for our network of Business Stores.

In December 2017, we acquired Nettl of Exeter, one of our top performing partners. In July 2018, we acquired AG Signs Limited in Honiton. Our next step is to roll these businesses together and create a beautiful new Nettl business store in Exeter.

Do you own a signage or large format / display business? We’re looking for entrepreneurs who want to be part of something bigger. To roll their business into Grafenia and build a Nettl Business Superstore, or develop a Regional Hub. With our funding, our marketing, our tech and our support.

Joining Grafenia means being part of a publicly listed company without the usual costs and obligations, giving you more time to focus on “business as usual”. It means ready access to capital to provide for strategic expansion or “bolt-on” acquisitions. And that capital is patient, with long-term ownership which thinks in terms of 10, 20, 30 years or more, not on the next set of results.

We’re also talking to owners who’d like to retire and cash-out. With full, or partial exits, structured to your individual requirements.

Interested? Or insanely excited? Good. Email letmein@grafenia.com to schedule a callback. We’ll keep all communications strictly confidential and will generally respond to enquiries by the next business day.

Let’s roll.