Refinancing Fuels Acquisition Ambitions
Energy consultants receive financing for acquisition and organic growth
- Turnover £5.2 million
- Sector: Inspired Energy is a power and gas consultancy, helping companies to develop energy procurement strategies, reduce their carbon footprint, secure best prices and audit energy use.
- Inspired was founded by Janet Thornton in 2000 and now employs around 80 people.
- In 2011, the company floated on London’s Alternative Investment Market. A year later, it made its first acquisition.
- In 2013 the company decided to change banks to raise funds to grow through acquisition.
- Santander refinanced £3.5m in existing debt and provided a rolling £1.5m acquisition facility. The package enabled the company to pay its first dividend to shareholders.
- A package to suit Inspired's market reporting schedule was agreed within weeks.
- Inspired plans to expand into Europe and make further acquisitions.
When Lancashire-based consultants Inspired Energy joined the Alternative Investment Market (AIM) in December 2011, the flotation marked a milestone for a business that had made the journey from one-woman-band to publicly listed company in just over ten years. But gaining PLC status certainly wasn’t the end of the road. With a Santander rolling credit facility of £1.5 million underpinning its plans, the company is set for further expansion.
Founded by entrepreneur Janet Thornton in her hometown of Kirkham, Inspired Energy is a consultancy providing a range of services to help businesses manage their electricity and gas costs. Procurement is at the heart of its offering, with Inspired negotiating deals on behalf of clients. The company also provides energy audits, market analysis, energy management and advice on renewable energy products.
For many companies, energy represents a major cost component and the market is enormously complex in terms of the range of suppliers and the deals on offer. “We help our clients get the best prices and we also help them manage the risks,” says Finance Director David Foreman.
The first acquisition
Having started life as a micro-business in 2000, with Janet working solo from her conservatory, the company expanded rapidly and now employs around 80 people. In April 2012, following its AIM flotation, Inspired acquired competitor Direct Energy Purchasing (DEP). It was a deal that not only scaled up Inspired’s business, but also gave the company a wider geographical base and a foothold in new sectors. “DEP had multi-site businesses and retailers in its portfolio and the acquisition gave us access to that market,” says David. The DEP acquisition also brought new suppliers into the Inspired fold and provided real-time reporting technology.
With its sights set on further growth, Inspired reviewed its banking options in early 2013. “We planned to make more acquisitions,” says David. “In order to do that we needed a facility that the incumbent bank wasn’t providing. We contacted Santander and asked them what they could do for us.”
A new deal
The company had two main requirements: the refinancing of £3.5 million in existing debt and a new facility that would allow Inspired to make acquisitions when opportunities arose. Inspired was keen to complete the deal ahead of its first major results statement since flotation. Companies that list on AIM are subject to constant scrutiny by existing and prospective investors, with the focus typically on the growth plan of the business. As such the investor relations activity first annual results statement was an important moment for the company. It provided the opportunity to tell a positive story, not just in terms of historical data, but also for its growth prospects in the future. In that regard, it was seen as vital to get an appropriate finance package confirmed in time for this event.
“We had to move very quickly,” says Santander Relationship Director, Simon Carrier. “We began talking to Inspired on a Thursday. By the following Monday we were credit approved and by Wednesday we had negotiated final facility documents with lawyers. Perfecting the security to completion took another week.”
Santander’s credit department, which ultimately approves or rejects loan applications, was brought into the loop of discussions to ensure that completion was not delayed by an approval process taking place on a different timeline. David was impressed by the speed with which the deal was completed. “The whole process took no more than three weeks,” he says.
A dividend made possible
In addition to refinancing the £3.5 million in outstanding debt, Santander agreed a £1.5 million facility that could be drawn on for acquisitions, but there was another important element in the agreement. “The new funding package enabled us to pay a dividend totalling around £450,000 to our investors,” explains David. “That was specified in the terms.” Paying a dividend under the previous arrangement would have been more difficult. The funding package – which also included clearing banking – was completed in time for the results statement. The impact on the company’s value was significant. When the dividend announcement of 0.11 pence per share was made in March, Inspired shares were priced at 4.62p. Shortly afterwards the price spiked to a peak of 5.5p before steadying well above the 5.00p mark in subsequent months. The share price continued to grow and by July stood at 6.00p.
“The statement and the dividend were very well received by our investors and that was reflected in our share price,” says David.
With Santander funding in place, Inspired is now planning to increase its market share. “We intend to grow organically and by acquisition,” says David. “The facility provided by Santander is central to those plans, as the company can negotiate in confidence now that funding is available.”
In particular the company is focused on acquisitions that will expand its geographic footprint, give it additional service capabilities or give it a foothold in new business sectors. Meanwhile, the company is seeking to continue a growth curve that has seen turnover rise from £4.1m on admission to AIM to current levels above £5m.
And as Santander’s Simon Carrier sees it, Inspired Energy is now well positioned to continue on a rapidly rising growth curve. “The company has the vision and sense of purpose that will enable it to take advantage of consolidation within its sector of the energy market, backed by a credit facility that is there when required.”
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Relationship Director Comments
We were talking to a profitable company with a great management team and the vision to take advantage of consolidation in the energy sector.