Episode 12: ‘I put everything on the line for MBO’

0:02Welcome to the Dealmaker Uncut Podcast, where we speak to some of the UK's most exciting entrepreneurs and hear their investment journeys. We'll discuss the challenges, successes and lessons they've learned along the way with expert deals commentary from Jonathan Boyers, Head of Alvarez and Marcel Corporate Finance, and me, Chris McGuire, Executive Editor at Business Cloud.

0:27Welcome everyone to the latest episode of the Dealmaker Uncut podcast, powered by Alvarez and Marcel. My name is Chris McGuire and I'm the Executive Editor of Business Cloud. Now we're in a different studio today but some things don't change and I'm joined by one of them, the multi-award winning dealmaker himself, Jonathan Boyers. Jonathan's been involved in deals totalling£5 billion during his long and illustrious career and he's a Managing Director and Head of Alvarez and Marcel's Corporate Finance Practice in the UK. Welcome Jonathan. Thanks Chris, great to be here, really looking forward to this session.

0:59Okay, this is the podcast that gets you, the listener and the viewer, in side the deal. In the first part of today's show, we're going to be interviewing our special guest. After that, we'll then have a short break. And in the second part, Jonathan will be answering your questions, leaning on his 35 years of experience working in the corporate finance sector. Jonathan, you know our special guest very, very well. Who are we talking to today? Well, Chris, today is an old friend of mine. We're going to be talking to Matthew Hurst. so matt the ceo of global energy software giant esg and um an excellent entrepreneurial uh ceo of a business as well he's i first knew him when he was um the ceo the ceo of a business called utility group and we'll tell the story of how utility group turned into esg i thought you're going to say i first knew matthew when he was a boy um you really would be going a long way back So, yeah, huge welcome.

1:52Welcome to Matthew. Thanks very much, guys. Matthew or Matt? Matt. Matt, okay. Matthew's like your Sunday name. Sunday name, yeah. Matt, I think I'll kick off if I may. I think it'd be quite helpful to set the scene. Just tell us a little bit about ESG and what it does. Yeah, we're a global software provider to energy and utility customers. We provide our software into three main pillars, energy retail, smart grid and renewables, and energy assets and infrastructure. We're massively passionate about what we do and we put power in our customers hands to make a difference to end consumers of energy so that everybody can benefit from technology and energy.

2:29Now I know how big ESG is, I think people sometimes don't necessarily know the scale, but you've got a head office in Chorley, offices around the world. Just tell us about how big ESG is. Yeah, so we're in four countries now. We have offices in Houston, Boston, Copenhagen, Denver, Calgary and also the mighty Chorley here in the northwest. So, yeah, 750 people. We've made roughly 10 acquisitions and our revenue is now well into nine figures. So it's great to see that you're now leading such a significant business, a global player. I think I'd like to take you back to where our relationship started back in 2014 when you were running a division of a public company called Be Global and the opportunity arose to effectively to lead a buyout of that business so maybe you could just talk us through your perspective on that deal It's a real trip down memory lane And I'd forgotten some of the things that happened until I thought back about it.

3:39But I worked really hard to put myself and Drew, my business partner, into the position to be able to pull off a management buyout. And we knew that the energy market was becoming more attractive. Investment was going into it. Customers were moving away from the big six. The smaller energy supplies like your Ovo's and your Octopus were growing massively. And we were a big part of that change and that transition. so you know we'd been planning a buyout and looking at the possibilities of one for a while but I think it was all about timing you have to be in the right place at the right time when you when you strike with your plans and what you'd like to do yeah I mean being open I was actually advising the public company obviously as you remember and there was a moment in time when when they decided they were going to sell the business and you were just at the...

4:32Well, I suppose you'd made yourself in the right place at the right time, hadn't you? Yeah, and I'd not been MD for very long of utility group, but I was speaking to a lot of people, advisors, friends of mine that had done management buyouts, and I just felt that it was our destiny. That being said, I also felt we were walking a bit of a tightrope. As you said, B-Globe was a listed company, so we were quite limited in the information we could share to garner interest from potential investors in us. So I often think that this is a great case study in how private equity can create value, particularly for a management team who have the opportunity to be involved in the acquisition of a business through this type of deal.

5:17So you went out and you ended up leading a buyout that was funded by North Edge. and they put about 11 million pounds into the business and you'll have raised some debt as well um it might just be worth talking a little bit about what your perspective of of that that situation and what did you have to compute to the deal yeah so i mean firstly in terms of private equity i think you need to pick your partner really well so we picked a growth partner um that would come on the journey with us and could see the potential in our business and of course they want us all to be aligned with that which means investing some of our own cash I think it's a bit of a fallacy to say you know people have to put houses on the line and stuff like that but I had to put everything that I had into it in terms of savings and future bonuses as well as part of that deal because they want to feel that you're in it and if times are not quite so good that you know you'll do everything that you can to put things right luckily for us we weren't in that position yeah so you you then um set about deploying a business plan to to grow the business and and actually really successfully so it would be good to hear your your views on on that and how it felt growing the business and you must have quite quickly realized that you were creating quite a bit of value yeah so i think anybody that's in the position to do an mbo management buyout is in a fortunate position you know i think we need to recognize that but my advice would be to only do it if you're really certain about your prospects and that you believe in the plan that you've set forward and your ability to grow and i had real confidence in what we were doing you know myself drew martin evans you know we could see our growth already in the business and that was what made that deal challenging if you remember jonathan because when we first started talking to you about we wanted to do a buyout and you were selling utility group four b global the company was growing during that period of time so people we were talking to certainly the ones in the early stages we think with the other price was going up and up so it was then difficult to to convince them that it was going to be worth it but we had utmost confidence in what we're doing and you were right one of the other people that got involved was a chairman another friend of friend of mine probably yours too ian kelly um i'd be curious if you could just talk about his role a little bit yeah ian was ian was a great addition and i met a few potential chairmen and they're all good actually and um i just felt with ian that the mentorship that he provide would be really beneficial because i didn't know what i didn't know you know less than two years before i've been a sales director of a relatively small software business, you know, mid-30s.

8:07And I thought that the mentorship from Ian would really pay off because he'd been CEO of a number of very successful private equity-backed businesses. Yeah. I mean, obviously, I've seen chairs join private equity houses in a range of businesses. And that was one of the really good examples of how a chair relationship with a CEO can work really well and effectively. So that was good to see. Can I ask you a question, Jonathan? So given the fact that you've worked in this industry for like three and a bit decades, when you must have, when you see, you know, Matt Hurst across the table, can you literally just take yourself back into that deal and like, you know, go into your memory banks and recall what happened?

8:46Because what I remember about the MBO was there was a lot of interest in it, wasn't there? Yeah, this was a really great example of value creation. and I often do talk about it actually as a case study when we're talking to new clients about how to, particularly the deal that we're just about to talk to when the business was then sold onwards by North Edge effectively to ESG and the way that that was done and the preparation that was done, the way the business plan was effected was a really good example of value creation. so it's not always it's not always like that and and sometimes it's it's it's in hindsight you can see that it with the value has been created i think when that first deal was done you know i think you did have confidence in the plan but it was by no means certain whatever is certain we had real confidence because the growth of our customers we were launching new solutions and there was also the smart meter mandate from the uk government which we developed software a couple before to meet that need and ultimately you know we contracted with all our customers and more some new customers as well for that solution and that gave us that confidence.

10:00So there was a sort of regulatory change coming in the industry that effectively we had to decide to wait until that was proven when that would happen didn't we and then and then that process could be launched but we did get from memory 62 inbound inquiries when we were appointed to to sell the business the second time from PE houses and it was it was not uncommon that that happens but managing that level of interest in a relatively short period of time obviously in the end there were only a small number that were the right people to deal with I mean there's a lot of trade as well wasn't there were yeah there were I feel like I'm intruding in your memories here I mean you know I'm not here to blow you know smoke up you know Matt's derriere but But under his leadership, the company's valuation soared from 16 million to 100 million in less than three years.

10:53And revenue has increased fivefold to over 20 million. When you're doing a deal, how important is the CEO across the table? Really important. I mean, we were going to sell this business either to trade or to private equity or to a private equity-backed trade buyer. And it's fundamental that the CEO and the management team are strong and credible and can articulate their plan clearly and this was this was a good example but why don't you just give us your perspective on the the exit from from North Edge to ESG because that was a pivotal moment in probably in your life never mind your career. Absolutely and before I do that if we just go back to the Ian thing because I've got loads of soundbites from Ian some of which I can't repeat on here but one that really sticks with me is that We had our first ever strategy session with North Edge.

11:47And we were confident in our sales numbers. We got good products. But Ian said to Drew, who was COO at the time, he's now a CTO. He said, Drew, we need the engine under the bonnet to be just as good as everything else. We need to be building a Rolls Royce when it comes to quality software, documentation, processes within our business. So that we derive maximum value several years down the line. and he was absolutely right with that. So when we came to the process in 2017, we started that work about a year before, didn't we? And as you said, we had lots of inbound interest and we actually met Axel KKR in the summer of 2016, probably nine, ten months before we did that deal because we were out there getting to know people.

12:34But we were pretty meticulous in our planning, I thought. Yeah, it was interesting because they did make a sighting shot offer So in the end, the process drove the value to a much higher level. But they were one of the obvious buyers right from the first conversations, weren't they? I think most importantly, we really liked each other. We got on great with them and we possibly would come on to talk about what to look for in a partner. But we just felt that they would be a great partner for us. Can I ask a question about your chairman, Ian Kelly, as well, before you talk about the deal to ESG? is that, like, you hear stories about good chairman and bad chairman as well, and I know you looked at him as a bit of a mentor as well, but a good chairman can act as a buffer as well between you and the conversations ahead, can't you?

13:23Was that the sort of dynamic that you had with Ian? Yeah, I mean, we're going back 11 years now. You know, I was mid-30s, never been private equity back before. I didn't know what I was expecting, and Ian was a real calm voice most of the time. Knew when to push back with investors. as well as that you know we brought on a private equity really experienced private equity back cfo steve goslin who who worked with us and brought some of that nous that we didn't have i think all that was really important because you know without that i think me and drew would have been like rabbits in the headlights maybe you might be being hard on yourself there we'll never know we won't so so we um so so we ran the process in the end and uh and it was competitive there were there were really two or three really strong bidders weren't there but in the end the business was sold to esg um and utility group was rebranded um as esg um and then you had a new career new lease of life in your career i'd be i'd be grateful if you could tell us a little bit about that and how that felt because there's lots of different points that that people in a deal experience here aren't there in this example and this is the next one you sold the business you've become part of a bigger group with a new US-based private equity backer.

14:41So how was that? I think we were really sold, myself and the Utili Group team, were really sold on the partnership with ESG. I say partnership, we were acquired by ESG, but the concept of building a global energy software company, leader in energy retail software in the US, combining forces with the leading player in the UK, was a really exciting proposition. so yeah ultimately we did change the company name it's not something that i'm massively passionate about i think we've changed the company name five or six times in the uk my 25 years i think so long as you keep delivering for customers company names come and go i wasn't too bothered about that but what was really important when i became global ceo was to build a global culture within our business and that's become even more important with some of the m &a that we've done as well.

15:28Yeah, so you've then continued with M &A activity, haven't you? And you've bought quite a few businesses. Yeah, yeah, we've done 10. Yeah, roughly 10. So anything that you've learnt in that period of your career? I think what's important to say is that we're not a buy and build company. You know, our growth is based on organic growth, bringing new products to market. We've supplemented that with M &A. And we're quite laser-focused when it comes to M &A in managing the prospects, the pipeline, the people that we're talking to. And we look at it in three lenses. We look at it in, does it expand us into new geographies?

16:04Does it expand our platform, extend our capability? Or thirdly, does it help to consolidate competitors in the market? And again, I think you helped us with that deal when we acquired a company called Apros in the UK, which was a smart meter competitor. And sometimes some of the deals that we do, some of the M &A ticks more than one of those three boxes. such as Pandell in Canada, which is our largest one to date, other than the SG and Utility Group coming together, took us into Canada and also into some new software sectors such as renewables. So some really good use of M &A to develop the business.

16:43So how have you found integrating those businesses? How's that process gone? The most important, well, two most important things when we're doing M &A. so obviously we need to believe in the business do the due diligence speak to the customers that customers are happy and that they're doing a good job for them it's really important that we believe that the company will grow as we think it will grow and it has grown I think the two once you've done all of that I think the two most important things when you've signed you need to not just look at the founders because often the founders will want to leave but to look at the management level beneath the founders and how strong is that capability with them and i think what's also just as important is to be really open about your intentions for that business so many of the acquisitions we've done are not competing products so there's no plans to retire those products which is obviously really good for for the people in those businesses if you're requiring a competitor slightly different but you take the best of what you've got regardless of where it comes from and i think so long as you're open with your intentions then um people essentially you earn trust down the line yeah you've um just completed your 50th trip to the u.s which is incredible you know you're 16 when you first went with wardle brass band um good trip that absolutely and we're still talking about it in wardle you know um i um you know we're we're recording this episode just after the rider cup which um europe famously won you're a king golfer you're wearing your rider cup top right now it's a master's top yeah yeah well it's a golf top isn't it um when we talk about like integration because you've got a big us operation and you've got a big uk operation as well i don't know whether or not you'll be talking golf when you go over to the Oh certainly, definitely.

18:41I mean presumably you were cheering for Europe were you? Oh of course, yeah. Absolutely, but that dynamic in terms of you believe that you can't be an invisible entrepreneur, so when you did the deal and became global CEO of ESG, you carried on being based in the North West, but you committed to travelling over to the US probably once a month or so as well. Why do you do that for and what's your approach to that? Yeah, I reckon I'm there about once a month on average most years. But, you know, what do we all want in the leaders of our businesses? You know, if I think back to earlier in my career, what do we want?

19:17We want to see them. We want them to be approachable, to listen to our ideas. We want them to be open as much as they possibly can be and to make us feel valued. And we spoke about Ian as a mentor. I've had loads of great mentors, people like John Furness, Martin Evans, back in the Utili Group days. so you know I've had some really good role models I'm fortunate of that I've got a new mentor now in Mike Cornell he's worked with AKKR before he's come onto our board as a non-exec because every day that I'm leading this business it's a bigger business than I've ever run before which is a great position to be in but it's nice to have someone else helping you with that It's great to see the way you progress and your careers progress to lead such a fantastic business of such scale, a global business.

20:07You know where businesses, Jonathan, fail and they don't grow, they take investment. If you look at the story of Matt and Utila Group and ESG, it would look like a conveyor belt, a successful climb. It doesn't always work that way, does it? What are the mistakes that CEOs sometimes make? i mean obviously the the journey to grow a business in the way that match them there's lots there's lots of decisions to make and any you know any one of them could be could be you could take a wrong turn they i think people sometimes are not bold enough um sometimes the i mean one of the obvious um mistakes people make in this type of scenario is to not integrate businesses properly so they make acquisitions and then do the integration superficial sometimes as an opportunity comes lands on your on your in front of you like the original deal the opportunity arrives if you don't take it when it's available it might never come again so there's you know the map took the opportunity when it arose it was sold at the right time as well so So choosing an investor who is going to be a good partner in an investment, like as North Edge were, I think that decision was a strong decision.

21:31But any of these decisions could, if you make the wrong one, things could go differently. But I think that being bold and taking the opportunities is probably the key here. I think a couple of things to dive in on that, what you just said. I said earlier that I've always felt timing's everything. life um and it certainly was you know that first deal we did with north edge because we only met them in march and we ended up signing at the end of may whereas some other people were met in the summer prior in 2013 because the business was then growing they couldn't get ahead around b global's value expectation uh so timing was really important there um for sure i mean secondly I can't just take all the glory and I couldn't have done the first buyout without Drew he's just as much an entrepreneur as I am and now we've got a brilliant leadership team in place in ESG and I try my best to get out of the way and let them do their thing as much as I possibly can as well.

22:32I know this is the Dealmaker Uncut podcast but I'd be fascinated on your view on artificial intelligence what's your approach to AI? Well I think first the first thing to say is it's exciting this is an exciting time especially for a technology business like ours we've recently brought a new product titanium to market which serves billing for commercial industrial energy customers brand new platform loads of interest in it and you're by using ai in the development process we're roughly 20 more efficient than we would have been had we not used ai tools so we're already using it we're using it both in the product and to make ourselves more efficient to be more innovative we think it is a competitive advantage for us but i think we need to see it as an enabler it's not a replacement it's an enabler to make ourselves better to do things quicker to be more innovative in our products but i think as a leader of a business you're the same jonathan at a &m i think we've also got responsibility as well because you know what makes us special is the energy expertise and the tech expertise within our business and you know if we don't protect some of the entry-level roles and you know the futures for our kids coming into it then who are the experts going to be in the future and i think to to balance those two things i'm not sure i've got the answer to that at the moment but we all need to be mindful of that yeah i mean we we are looking at similar similar things how would you use it to improve the business you know we can produce documents documents a lot faster we could use research a lot more effectively using ai but can you the softer political aspects of managing a deal i'm not sure ai could easily do that and like you say you need to keep training your people as well so you can't just replace people who do the more routine jobs with ai and then find that you've no no um team coming through when you need them i think there's a balance to be struck there yeah there certainly is you know focusing your people on higher value areas I'm all for that but but I think you know we do need to be mindful of the other side as well and I think certain professions are going to struggle here's a question for you Jonathan which was I remember going to utility groups offices after Northoes did deal and and I remember meeting Matt I think probably for the first time I've met him a number of times since and we both are members of the same gym can't you tell Matt's having much more success than I am but what I would say with Matt is that he's become the chair of Inspire Youth Zone in Chorley which is very very close to his heart I don't think fundamentally Matt's changed as a person has he despite the success of Utila Group and ESG would that be fair?

25:23No I think Matt's very down to earth and actually if you look at the progression of his career he's now one of the a major CEO of a major business but when we talk it's the same conversation the same at heart I've got the same group of friends, I don't think my mum and dad would be very pleased if I changed too much and I'm sure Becky my wife might say I've changed a bit, but I think we do we grow and kids are growing up now, they're 13 and 11 and I've got the same group of mates I play golf with and I went to school with and I think that's really important and it's something I'm trying to instil in my kids.

26:03What's your golf handicap now compared to 2014? Well, I didn't play golf then. I've only been playing about six or seven years. It's 13 point something. We can say what we really think about Matt after the break, but that's all for part one of the Dealmaker Uncut podcast. When we come back, we'll give our views on the interview and then, Jonathan, you'll be answering listener and reader and viewer questions. Thanks, Chris. Thanks, Matt. Great to see you. Yeah, good to see you both. Thank you.

26:38Welcome back to the second part of the Dealmaker Uncut podcast. We've just interviewed Matt Hurst, CEO of ESG. He left the room. So, Jonathan, you can be honest, what do you think of Matt? Well, I've always been really fond of Matt. I've obviously worked with him over a number of years now, since when was it? Was it 2014? he's developed as a leader incredibly over that period he was a strong leader he was a young man when he led that first deal but to see the progression in his career and how he's led that team he brings people together he's collaborative and I'm just delighted to see how successful he's been it's a real privilege I think the thing about Jonathan as well is so I think the thing about Matt Jonathan is that he really knows his industry he's never trying to veer away from that he's worked in the energy sector for 25 years a couple of things about Matt I like is that he's always had an open-door policy in a sense that he's never locked himself away in an office so it's been an open plan office and when I did an event not so long ago and Matt was in Denmark on the day and then there was this drone incident at the airport and he had to fly via Amsterdam and he got back from my event in time despite the fact he had to bust a gut doing it and I just thought well actually he gave me his word he's going to be there and he was and I think that sums Matt up so yeah no surprise that he's been successful and he's not stopped yet he's not finishing yet I think he's got a long way to go no I mean like I say he's very very well known in his industry everybody knows him in his industry ever meet somebody around that sector.

28:21Everyone knows Matt. Yeah, it'll be fascinating to see the next chapter. He's still young. He's still got a lot to do in his career. So we'll watch with interest. This next section is called Ask Jonathan. It's when listeners can ask Jonathan any question they want. I've always got the odd question as well. So Jonathan, question one. Alvarez and Marcel recently advised on the beach on their refinancing. I'm reading a lot more about refinancing. Just explain what that involves and why are so many companies going down this refinancing route? Well, I mean, most businesses of scale that have a line of debt will at some point need to refinance that debt.

29:00The debt lines are often limited in time and they need renewing. And so the re-banking is a fairly ordinary thing for a business of scale to do. as a routine part of their business. Obviously, often businesses that are involved in a transaction or if they're looking to expand or make an acquisition, they'll need to raise additional funding and whether that be an additional debt line. And often they'll raise a debt line to try and cope with maybe a series of acquisitions so that there's not a repeated need to keep raising more debt. but there are lots of different reasons why people might need to raise debt.

29:46It's obviously a skilled bit of corporate finance is raising debt and our debt people are great actually. We work closely with them on almost every deal. There's a need to understand what the debt capacity of the business that you're selling will be. So yeah, we work really closely with them. The next question comes from someone who clearly reads your LinkedIn posts because you spoke about this in one of your recent pieces. What are enterprise value to earnings multiples? Right. So this is talking about how to value a business. And I think as most people involved in sort of valuing businesses would know that the value of a business is theoretically the present value of all the future cash flows of the business are discounted at a discount factor that takes into account the risk profile of the business.

30:40So that's technically how to value a business. But in order to do that properly, you need to know fairly accurately how the business is likely to perform in the future. So forecast over several years. As an approximation to a discounted cash flow calculation, people will often apply an earnings multiple to a multiple to an earnings figure to to arise at a valuation that's just a mathematical simplification of the DCF calculation so often people talk about EBITDA multiples and to do that they'll look at implied multiples in in other similar deals to look at the price that was paid compared to the earnings of a business in transactions.

31:31But often they'll look at quoted company multiples as well to see if there's a comparable quoted company. And if so, they'll look at the valuation multiple implied by their market cap. So it's basically a methodology for valuing businesses. Okay, final question for the day. M &A activity dropped significantly in the first half of 2025. with the unstable geopolitics being partly blamed. What's your prediction for the rest of 2025 and the start of 2026? Yeah, so the market has not been particularly on fire for the first half of this year. 2023 was a really poor year and there's been some recovery since then, but people have been expecting the market to recover significantly since then.

32:20It's not quite happened. There's always been another event that's happened. I think if you see behind that, it's actually more of a cure-its-egg in that it is good in parts. In tech-enabled services, technology, certain parts of healthcare, there are sectors, particularly where sectors turn into technology, where businesses are doing really well and the M &A market is still quite buoyant. So a tech-enabled services business that's well-positioned can still attract a really well-attended auction and get really good values. Some of the more old-style businesses that are not tech-enabled, they might not attract the same attention.

33:04So you've sort of almost got two speeds where some parts of the market are really attractive, whereas others, people are really cautious. So it's more complex than just it's still a bit flat. We expect that next year will improve. We've seen over the summer a lot of pitch activity. Just in the last month or so, there's been loads of pitch activity. So a lot of people gearing up to run processes in either the last quarter of this year or the first quarter of next year. So I expect to see it recover. Obviously, we're always subject to the vagaries of various events, what happens in the budget, all that sort of thing.

33:43but we remain optimistic about the market. Okay, that's all for this episode of the Dealmaker Uncut podcast, powered by Alvarez and Marcel at their offices here in Manchester. I checked the charts, Jonathan, you'll be pleased to know the Dealmaker Uncut podcast continues to ride high in the UK podcast charts and in Italy, which is good to know. Final shout out to you, the star of the show, Jonathan Boyers. I wish you well. Thanks for joining us. and onwards and upwards thanks Chris don't forget to subscribe to the podcast tell your friends and family and follow us on the social media to get us back up those podcast charts and rate it five star if you like it okay thanks very much