Organic Growth Masterclass: APEM, backed by WestBridge

Environmental consultancy APEM underwent a management buyout (MBO) backed by WestBridge in 2019. CEO Dr Adrian Williams talks to GBI about finding the right funding partner for the company, and the key steps taken to triple the size of the business since then.

Stockport-based APEM was established in 1990 and provides environmental consultancy, laboratory services, field surveys and remote sensing capabilities to a range of sectors including water, power, engineering, construction and transport.

“We were self-funded (with some loans) until 2019,” says Dr Adrian Williams, CEO of the APEM group. The company was employing 100 staff and generating a £10m turnover at the time. “We had essentially been running the company for three years before then, and I became the managing director in 2018. The original founder wanted to step away so we were gearing up to take over the business, but we also needed some financial backing to do so,” he adds.

The management team mandated an adviser, who got to know the team and the business before running the process in order to find suitable partners. “Fundamentally we are a mix of ecologists and scientists, so the fit had to be right,” Williams says. “The adviser came up with a shortlist of potential PE backers, all of which made an offer. That level of interest put us in a great position, as it effectively became a search for a strong two-way relationship.”

Private equity firm WestBridge eventually invested £9.8m in a combination of equity and loan notes, securing a majority stake in the business; Yorkshire Bank also provided senior lending and working capital facilities. The transaction was led by Guy Davies and Valerie Kendall, founding partners at WestBridge, who both joined the board.

Asked about what influenced the decision to partner with WestBridge, Williams notes that the private equity firm stood out from the start, “mostly because they genuinely understood what we were trying to do - they got our growth ambitions, but could also offer an objective perspective on our plans to get there.” The ongoing relationship has remained strong since then, Williams adds: “We really liked the fact that the people that did the MBO - and that we therefore got to know well around that time - are still the ones we deal with on a regular basis three years later. And they still come up to see us in Manchester every time we need to meet, which we always appreciate.”

Step change

Up to the 2019 buyout, APEM’s growth rate was averaging around 10-12% per annum, Williams says: “All of that was very much built around technical expertise; this is great, and still key to what we do, but I felt we were missing a trick in having a finance team that really understood where the opportunities would come from, and then focus on generating profit in order to reinvest in the business. So one of the key changes we made with WestBridge’s backing was to get our first finance director, and build the whole finance function around that. We also got a chairman on board around that time.”

Sales and marketing were also a key focus, Williams adds: “If nobody knows what you’re selling, even if it’s fantastic, what’s the point? So we wanted to have a go at professionalising that process, without losing the expertise we had when it comes to the actual services provided.” As part of that effort, WestBridge and the leadership team strengthened APEM’s approach to tender writing and provided sales training for a large part of the team, so that everyone could focus on growth opportunities among the company’s established customer base.

Finally, APEM paid renewed attention to the people side of the business. “Fundamentally, we are people-driven: we sell our intelligence and expertise, rather than a product,” Williams points out. “The HR side of the business was therefore critical to our ongoing growth trajectory, so we also got an HR director on board to oversee that.”

The leadership team always intended to grow via acquisitions as well, with the first of these earmarked for the second year post-MBO. While the pandemic delayed the plan by about a year, APEM went on to acquire no fewer than three businesses in the past year: these include Woodrow, an environmental and sustainability consultancy based in Ireland Aquafact, a specialist in marine surveys also based in Ireland; and most recently GoBe Consultants, a Glasgow-based planning and environmental services consultancy.

Results and looking ahead

Overall, the business has tripled in size over the last three and a half years, Williams says: “We are now generating turnover approaching £40m and EBITDA of £8m, up from £10m and £2m respectively pre-MBO, with 75% of that growth being organic. We also quadrupled our headcount in that time. We currently employ 430 people - and that number is increasing every day - across 13 offices in the UK & Ireland, as well as having a presence in Germany, the US and Australia.”

While welcome, that level of growth acceleration can present its own set of challenges for any business. A key focus for APEM will be on making sure that client satisfaction and advocacy are where they need to be, Williams says: “We now offer more services and we cover more geographies, but we have always been about the quality of service as opposed to pure volume, and I never want to lose sight of that - 95% of our clients would actively recommend us to others, and that is a key metric for us.”

Recruitment and retention are incredibly important as well, he adds, noting that since the MBO, responses in staff surveys have been increasingly positive (now averaging at around 85% positive). “What we want to tap into is people with a purpose-driven mindset, potentially from other industries but who want a greater sense of purpose in what they do for a living,” Williams continues. “Can we attract these people, and complement that mindset with the right training to deliver our typical expertise? That would be an interesting challenge for us. Overall, ESG’s rise to prominence is a major driver for us, and we have a built-in advantage in the sense that it has been part of what we do since the very beginning.”