The cleaning services industry should brace itself for takeovers as a series of curious circumstances begin to shape the industry, argues a new market report from analysts Plimsoll Publishing.
The study warns that a combination of stock piling cash, difficult growth, low interest rates and ageing directors has left 190 companies ripe for acquisition as the sector consolidates, evolves and starts to prosper again.
David Pattison, senior analyst on the project, said: “On one hand, 16 cash rich companies have been stockpiling cash and their problem is that the built up cash could give them a real headache. Low interest rates mean this cash will be sitting idle on the balance sheet and not generating a return. It really needs to be put to good use and an acquisition seems an obvious option.”
Some simple findings from the Plimsoll analysis found that:
• Almost 25% of directors will be over 60 by the end of the year.
• 16 companies have over £5 million of cash on their balance sheet.
• 171 firms are still operating as independents.
• 57 % of organisations did not increase sales.
• One in three companies are running at a loss.
• 136 of the 978 businesses analysed have seen their debts increase.
Pattison continued: “Then on other hand, 190 businesses in the cleaning services market are showing classic acquisition criteria. They are all declining in financial strength, many have an aging board and are still privately owned. These companies will need the support of their current owners or investment to ensure they have a future and many have acquisition potential. Given the circumstances, it's quite possible that perhaps some of the directors will be looking to retire or even consider a sale.”
The Plimsoll Analysis, which is also available in an online format, provides an individual profile of each of the UK's top 978 cleaning services companies. It offers an overall financial rating, a valuation as well as an acquisition attractiveness assessment on each company and helps understand up-and coming-competitors in the market.