EnerMech has invested £30million in the acquisition of seven businesses in its first three years, establishing a broad range of mechanical services in six business lines.
The businesses we bought had combined sales of £40million and the success of our integration efforts since the last acquisition in 2010 is clearly demonstrated by 2011 sales of more than £100million to a substantially broader customer base.
This next 12 months will be a key period in the growth of EnerMech as we embark on a series of fresh acquisitions which will transform the company and take us to the next level of our planned growth strategy.
In tandem with growing our core UK continental shelf business, we have firmly established our brand in the key oil and gas producing regions by putting “feet on the ground”.
We don’t believe a quality level of service can be provided for clients by placing an EnerMech flag in a far-flung location and shipping in personnel and equipment only when a contract is awarded.
Instead, in addition to the £30million spent on acquisitions, we have invested a further £45million in infrastructure, permanent bases and in-country staff in 18 locations, stretching from Norway, the Caspian and Middle East, and from Singapore, Indonesia and China, to Perth and Melbourne in Australia.
Our focus in 2012 is on West Africa, Asia and the US and simultaneous negotiations are under way on these three continents to acquire businesses which have either the infrastructure, or allied skills and technical expertise, which fit the EnerMech template and will offer us a strong presence in those key markets.
A joint venture agreement in Nigeria is at an advanced stage and we have identified a similar opportunity in Angola, with an acquisition in South Africa also in our sights.
All going well, these deals will give us a solid platform to introduce all of EnerMech’s service lines to Africa – one of the world’s fastest-growing offshore oil and gas locations – and we forecast the African market will generate sales of £12million in the first year, rising to £25million in 2013.
In China our partnership with Qingdao Pacific Oceaneering has already secured substantial contracts and we are looking at a possible acquisition to add to our already strong relationship, while we have identified a possible tie-up in India which will strengthen our valves business.
In Australia we are committed to building on a very strong initial entry into this important market and are looking at a number of potential acquisitions.
Until now, we have deliberately positioned EnerMech as a UK/Eastern hemisphere oil and gas specialist, but that will change and we are tracking two target companies which will transform our Houston operation and give us a full service capability in the US.
This will be the foundation block for future expansion into the Canadian, Brazilian and Mexican markets.
We are constantly looking at new opportunities as they arise, but we will not be drawn into any acquisition where the target company places an unrealistic value on their worth, as happened recently with a large UK target.
We have enjoyed great support from Lloyds Banking Group and it recently extended our revolving credit facility to £30million, with an option to grow the facility to £40million, in line with the company’s profitability.
Our private equity investor, Lime Rock, has committed to a significant further investment to support new acquisitions and, working closely with both groups, we are well on the road to establishing EnerMech as a truly international mechanical engineering company.
Doug Duguid is managing director of mechanical engineering company EnerMech.
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