ÅF resumes tuck-in M&As, Belcan expands in UK, and HCL Tech strengthens its semiconductor capabilities

/ September 11, 2019/ ÅF Pöyry / AFRY, Belcan, HCL Tech, M&As (small under $50m in revenues)

HCL Tech, ÅF, and Belcan have announced tuck-in acquisitions in the past week.

As announced during its H1 earnings call, ÅF is resuming its acquisitions: the company has a net debt of SEK 5,154m (~USD 550m) and believes it now has the required financial flexibility.

ÅF is strengthening its Infrastructure Division with a Swedish electrical consultancy that services cultural heritage buildings (e.g., museums, castles, and churches), Sonny Svenson Konsult. Sonny Svenson has a headcount of 10 and revenues of SEK 14m (USD 1.5m). ÅF continues to bring further specialization in its mainstream public works engineering division. This is a logical acquistion.

We are less comfortable with ÅF’s acquisition of the electronic unit of CTT Systems. The acquired business develops electronics (e.g., audio systems, support systems, pilot microphones, moisture control systems, and electronics units for underwater systems) and provides small-scale manufacturing. Although the acquired business is very small with a headcount of 12 and revenues of SEK 12m (USD 1.2m), we are not comfortable with ÅF expanding its capabilities in a business that has a business model that is different: SII and Cyient have struggled with the small scale production business.

Meanwhile, ÅF’s Martin à Porta, the former CEO of Pöyry, and head of the small but high-growth Management Consulting division of ÅF Pöyry is leaving the firm, a bit more than six months after the acquisition of Pöyry. Nothing unusual here, but Martin à Porta will be remembered for turning around Pöyry from a loss-making firm into a solid-growth and profitable firm. He will be missed.

Belcan continued its expansion in the UK with the acquisition of a small engineering vendor, Lagoni. Lagoni is mostly focused on OT systems (i.e. shop-floor manufacturing systems) and has developed precious IT security capabilities. Lagoni services the UK utility business and is small, with a headcount of 20.

Finally, HCL Tech strengthened its semi-conductor capabilities with Sankalp Semiconductor, a chip design specialist. Sankalp had revenues in FY19 of INR 1,412m (USD 20m) and HCL Tech is paying USD 25m for the firm. HCL Tech is acquiring Sankalp at a time the semiconductor engineering has significantly slowed down, a result of the trade war between the US and China. However, in the long-term, the potential for semiconductors remains immense, with IoT and automotive as drivers in the short-term.

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