Bridgepoint to buy ERM for $535m

If it completes, the deal will be the largest-ever LBO of a firm operating in the UK professional services sector.

London mid-market buyout house Bridgepoint has made an offer for Environmental Resources Management (ERM), a provider of environmental consulting services, valuing the firm at $535 million (€442 million). Bank of Scotland is providing an undisclosed amount of debt for the transaction.

3i’s Turner: Right time to sell

Bridgepoint is seeking to buy the 52 percent stake held by London-listed private equity firm 3i, as well as the remaining 48 percent currently held by ERM’s 400 employee shareholders. The firm expects a significant number of employee shareholders to roll over a portion of their proceeds from the sale to re-invest in the new business.

If completed, as expected, in December, the transaction will be the largest LBO ever undertaken in the UK professional services sector, said Bridgepoint. The acquisition will also be the first investment from Bridgepoint Europe III, which closed on €2.5 billion ($3 billion) in May of this year, exceeding its target of €2 billion.

According to reports, Bridgepoint outbid rival offers from PPM Capital and Electra Partners Europe.

3i director Mike Turner told PEO that 3i had “made around £100 million profit” on the sale. “We had effectively taken the business through a significant internal restructuring, and profit growth accelerated in the last 18 months or so after the changes had taken place,” he said. “That gave us the confidence that we could get the full price for it – much more than we could if we had floated it.”

3i originally acquired ERM in 2001, investing £55 million (€81 million; $98 million) in a £200 million management buyout, alongside debt provided by Bank of Scotland Structured Finance and mezzanine funding from Intermediate Capital Group. The original acquisition had been made from 3i’s Euro Fund III, said Turner.

ERM, which advises corporate clients on negotiating environmental regulations, has grown gross revenues from $289.5 million in 2001 to $425.4 million currently, and EBITDA from $26 million to $38 million. The business has over 100 offices in 39 countries and employs over 2,500 staff.