When property and planning consultancy Rapleys sealed a deal to take over West End specialist agency Mellersh & Harding last month, it marked another M&A milestone for the firm.
Since the summer of 2022, Rapleys has bought five businesses, a rapid rate of acquisitive expansion that has helped the company to bulk out in areas where organic growth would have been slower and less certain.
And the dealmaking shows no sign of drying up. When managing partner Justin Tuckwell speaks with EG a few days after announcing the Mellersh & Harding acquisition, he says Rapleys is in talks with 12 or so other takeover targets, and he expects three or four of those deals to be agreed before the year is out.
For Tuckwell, the past two years have been a period of learning and adapting. Eschewing the usual approach of leaning on dealmaking consultants to show him the M&A ropes, he has learnt on the job.
Now, he knows what he and the team want, knows what they will avoid at all costs, and has advice to share with any other firm looking to bolster its business through acquisition during a spell of industry consolidation.
Balancing act
A shift in the successes of Rapleys’ business led Tuckwell and the team to focus on M&A. “As ever with these things, you have plans, but it comes together as a consequence of circumstance,” Tuckwell says.
“We have gone through an unusual growth/non-growth reality. Up to five years ago our revenue had stagnated if you looked at it as a whole, but 50% of the business had significantly grown and 50% had significantly shrunk.
“Coming off the big recession, going through the Brexit processes, Covid – our professional functions had organically grown whereas the transactional side of the business had really shrunk in comparison.”
That led to some soul searching among the partners over the future of the firm if its constituent business lines remained imperfectly balanced.
“We were asking ourselves, ‘What have we become? What are we? How do we correct that and how do we create balance in the business? Are we, in this market, really going to organically create that growth in the transactional elements in particular?”
Buying and bolting on other businesses felt like a natural and faster way to build the transactional side of the firm back up. Tuckwell felt he already had a decent handle on how such deals should work – at least enough to mean he did not need to call on third-party advisers to help strategize his shopping spree.
He stresses that Rapleys is not for sale – “It’s not in our business plan, we’re not in the market, we don’t want to be in the market” – but says the team has been approached “regularly”, giving him a grounding in how to negotiate deals.
“We were being approached even at that time from specialists and experts in the market about buying us,” he says now. “To be honest, I’ve learned a huge amount from going through those processes rather than going to a consultant. You probably learn more from that than any other way.”
Talking targets
The first deal came in the summer of 2022 when Rapleys bought Bristol-based CSJ, a seven-strong planning specialist covering the South West. By the end of that year the firm had also acquired London-based surveying firm Aston Rose. The following year the firm acquired S106 Affordable Housing and, a few months before buying Mellersh & Harding, took over Bluebrick Building Consultancy.
The deals appear to have done the trick for the business. Its most recent accounts filed with Companies House – covering the year to 30 April 2023 and so including contribution from CSJ, Aston Rose and S106 Affordable Housing – showed record revenue of £14.8m.
Tuckwell points to three methods of identifying takeover targets. Some have worked better than others for Rapleys. First, there are agents touting businesses for sale on behalf of their owners.
“You have a discussion with these people and it’s all about the value of the business, the EBITDA and the world of selling businesses,” Tuckwell says. “We have yet to do a deal with one of those. We don’t tend to like that. Normally those businesses on the market through an agent are just there to sell for financial gain. That doesn’t work for us.”
Next come companies that the Rapleys team has hunted out with a particular business need in mind. “That element is targeted, looking at areas, regions or specialisms we need to be developed,” Tuckwell says. “It’s specifically going after targets and speaking to them.”
Finally, and most successfully as far as Tuckwell is concerned, are companies in which the team has come to Rapleys directly with a pitch that prioritises more than just pound signs. That was the case with both Aston Rose and Mellersh & Harding, the managing partner adds.
“When people are approaching us and we think they are the right type of people, the right culture, and the right ethos – that they are a Rapleys business before they’ve even joined us – the main boxes are ticked,” he says.
Seeing that potential, even in a business that might feel it has no future but to put itself up for sale, is a point of pride for Tuckwell.
“The market is quite tough out there, so you have got lots of businesses, particularly smaller ones, who have been struggling,” he says. “We back ourselves to be able to work with those businesses and turn that around, create efficiencies and create profit from a strategic approach to how it’s managed.
“When people come and approach us, even if the financials are not there, if they are the right people and you get that gut instinct that they are going to fit, then you’re almost there.”
Deal breakers
Almost, but not always. For every deal done, there are others that have not worked out.
“We have just fallen out of bed with one that would have been significant,” Tuckwell says. “They approached us and we had 12, 18 months of discussions, lots of changes to how it was going to be, but what happened in that time is that the business that had approached us when the market was tough started seeing the market softening. All of a sudden, they decided they would try to give it a go themselves. That was a significant time and investment.”
There can be other reasons talks end, he adds. Sometimes a problem comes up during the due diligence process and his team realises that the story they were told by the target’s team “isn’t true”. Or an agreement can be reached with a target’s main shareholder but more junior shareholders bristle at the suggestion and scupper the tie-up.
For Tuckwell, no deal is so desirable that he cannot walk away. “As a businessman, I’m a risk taker. I love taking risks. But I wouldn’t take a risk with an acquisition that really endangered the success of our business,” he says. “I’m a strong believer that if it’s meant to be, it’s meant to be, and if something comes up that means it’s not going to happen, then you just walk away.”
He goes back to the recently dropped deal. “We invested tens of thousands of pounds in professional fees. If you add on our personal time, you’re probably up to £100,000 of investment. And we walked away because it was the right thing to do. We could have forced that, changed the deal structure to make it happen. But that would not have been the right thing.”
That is because difficulties as a deal is negotiated portend larger problems during the harder work of integration.
“What you learn through this process is the easy bit is getting the deal over the line,” Tuckwell says. “The hard bit is the integration and making it work thereafter.”
Loved and wanted
Much of that process is people-centric. “It is all the things like communication, transparency, making people feel comfortable and not leaving them isolated, making them feel part of the business, making sure there’s no differential between Rapleys and the new business coming in,” Tuckwell says. “They have got to feel loved, wanted and part of the business.”
That goes for the people right at the top. Tuckwell makes a point of spending time with the “key players” in an acquired company once the deal is done.
“I’ve probably spent more one-to-one time with John Williams from Aston Rose [now head of property management at Rapleys] than any other partner in our business,” he says. “That was a tough one for John – he’s run his own business for years, and when you get senior people coming into a larger business where there are a few more processes and procedures, then it’s difficult. I would struggle, anyone would.”
But it also goes for team members further down in the target company’s hierarchy. It is there, Tuckwell says, that the future of the combined business lies.
“People overlook this point. The value of that [acquired] business is not the main guys. Ultimately, the main guys are going to disappear. It’s about that next tier down, who are going to drive the business forward,” he says. “You’ve got to get that level bought in. Some businesses we have bought have got that second tier, others haven’t. You have then got to work with the senior guys who are going to disappear in a couple of years and bring that succession layer in. Otherwise it will fall over.”
And with that, Tuckwell heads back to the negotiating table to keep the next deal steady. I have to ask if they get easier the more of them he does? “No, because they get bigger,” he says, laughing. “And as they get bigger, they get more complicated.”
Photos © Rapleys
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