Apex Insight provides commercial due diligence to support Banijay Zodiak merger

Prior to the merger, Banijay Group, based in Paris, operated across Europe, the US and Australasia, with a particular strength in non-scripted / reality shows.

The merger with Zodiak, also based in Paris and strong across Europe, adds a range of assets including a leading production capability in the UK and a global sales arm with a large library of 20,000 hours of content.

The new merged Banijay Group, which will have revenues of around $1bn, has attracted investment from Vivendi, the parent company of Canal Plus, which has taken a 26.2% stake, alongside existing shareholders, LOV Group and De Agostini.

To support the transaction and subsequent bank syndication exercise, Apex Insight produced an in-depth study of the historical development of, and prospects for, the TV production markets in Europe and the US and Banijay / Zodiak’s position within them. This commercial due diligence work revealed that market growth has speeded up in recent years as television industry innovation has continued and the economic outlook has improved, in particular in markets such as Spain which were impacted by the Eurozone crisis. Forecasts are for growth to continue with Europe in particular benefitting from a more positive outlook for TV advertising revenues.

Philippe Magnani, Principal at LOV Group, said:
“Apex Insight’s work provided a detailed account of how the European and US TV production markets have performed, an explanation of the factors which have driven the trends, and forecasts of how the market is expected to develop in future”










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Apex Insight provides commercial due diligence to support Travelport in its acquisition of a majority stake in Locomote

Travelport operates a business-to-business travel commerce platform which provides distribution, technology, payment and other solutions for the travel and tourism industry worldwide. With revenues of over $2bn, it is based in the UK and quoted on the New York Stock Exchange.

Locomote, based in Australia, provides a sophisticated technology solution which enables companies to manage all aspects of their business travel from any device in any location. It serves a range of corporate clients including ANZ Bank, Allen and Overy, Medibank and WorldVision.

Apex Insight carried out a customer referencing exercise which involved interviews with customers from sectors including banking, insurance, law, higher education, retail, mining and events management. The work revealed that Locomote customers had enjoyed significant cost savings from adopting the platform and had high satisfaction levels with the system, with its ease of use being particularly noted.

Sandra McLeod, CEO of Locomote, said:
“Apex Insight’s work confirmed our belief that Locomote offers a sophisticated system which fits well with the Travelport platform and also identified some further opportunities for the business.”





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New Apex Insight research on the UK parcels market sets out revised market growth forecasts

This report covers the UK parcels market which, following a strong performance in the last year with improved industry profitability, is now approaching £9bn in size.

As in previous years, growth has been driven by internet retail which continues to expand and is expected to do so into the future. As the report describes, this will lead to increases in the numbers of home deliveries, despite the rapid growth of other last mile solutions such as click and collect. Nevertheless, an ongoing challenge for operators is the refinement of their model to serve home deliveries profitably, enabling them to exploit the growth segment without damaging their overall economics and service levels. The report describes the approaches taken by different carriers, how successful they have been and what impact they have had on growth and profitability.

The last year has seen the exit of City Link from the market but there has been no other significant further consolidation through acquisition. However the organic growth records of leading carriers show a significant degree of divergence between winners and losers. Operators who have gained share include Royal Mail / Parcelforce now under private ownership; DPD, which has made a series of B2C wins on the back of service enhancements; APC, where feedback on service remains strong; Hermes, which has also performed strongly in B2C based on its cost-leading business model; newer players such as brokers (Interparcel, Parcel2Go), networks (Collect+) and finally, potential industry disruptor, Amazon Logistics, which now operates a sizeable UK parcels network. Those who have lost market share include TNT Express, which has been impacted by contract losses, disruption from the UPS and FedEx bids and lack of exposure to the high-growth B2C segment and DX, where some business has been exited during the merger of the Nightfreight and DX parcels networks.

Overall industry profitability has improved, largely as a result of the closure of City Link and progress in the turnaround efforts at Yodel, but remains modest with continued price pressure resulting from the competitive nature of the market, the powerful bargaining power of big retailer cusotmers and significant excess capacity (despite the closure of City Link). Although recent profit warnings at UK Mail and DX serving as a reminder that things could get worse, several operators now earn respectable margins with six carriers having EBIT margins of at least 8%. Factors such as compatibility of operations with market segment focus continue to be more important than the effects of scale in determining operator profitability.

The full market report: UK Parcels Market Insight Report 2015 includes a review of industry trends, an analysis of its economics including, in particular, how home shopping growth translates to demand for parcels services, and the relationship between GDP growth and B2B parcels, as well as growth forecasts for the market and its key drivers.



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New Apex Insight research on consumer and small business parcels sending (C2X) reveals further growth but challenges ahead.

Consumers and small businesses wishing to send occasional parcels have traditionally been served by national postal services with customers taking their parcel to their local post office and queuing up to send it.

Historically, most parcels carriers did not target smaller customers. This type of traffic was challenging for their business models, which rely on consolidation of pick-ups to obtain superior economics and the fixed costs of setting up an account made small customers unprofitable
However, the rise of home shopping has led to significant increases in the volumes of items being returned by consumers. And marketplaces, in particular eBay, have many small sellers who need a way to dispatch items they sell but, like consumers, may not have the scale to operate accounts with established parcels carriers.

As a result, consumers, and small businesses are an increasingly important segment which has attracted the attention of traditional carriers and new entrants such as parcel shop / locker networks and online price comparison sites / brokers. Examples of networks include Hermes’ Parcel Shops, UPS’s Access Point network, DPD Pickup as well as independent networks such as InPost across Europe, Mondial Relay in France and Spain and Collect+ in the UK. Examples of brokers, which offer services from a range of carriers, typically at rates which would not be accessible to the consumer, include Packlink in several European countries, Parcel2Go in the UK, and Sendabox in Italy.

Many established carriers, as well as selling via brokers, have now introduced specific services for one-off or small volumes of consignments which they sell directly to consumers and small businesses via their websites and call centres. UK Mail’s ipostparcels was an early example with a distinct brand, but most of its competitors have now copied this approach. Our research on pricing shows that some are now very competitive, in certain areas of the market.

Prospects for further segment growth are healthy – certainly few doubt that home shopping will continue to grow in all countries, and European law increasingly supports and protects the right of consumers to return items.

However, there are some potential clouds on the horizon. For example, eBay’s growth is less rapid than in the past in its more mature markets such as the UK and Germany, and an increasing proportion of sales on its marketplace are from larger retailers. And there is an increasing tendency for larger retailers to organise, and pay for, their returns (as has long been the case in Germany), taking the sending decision out of the hands of the consumer and leading to a significantly lower revenue per parcel. Furthermore, our survey of UK small business senders confirms that there is considerable dissatisfaction with carriers and switching levels remain high.

Amongst the new players, it is not yet clear which business models and which companies will prevail as the winners. The market presents opportunities and threats for the various different models but volume growth has meant that any eventual shakeout has been delayed.

The full market report: European Consumer & Small Business Parcels Services: Market Insight Report 2015 includes insights from interviews with customers, profiles of the leading players, as well as growth forecasts for the market and its key drivers. There is also a UK-only version of the report: UK Consumer & Small Business Parcels Services: Market Insight Report 2015



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Apex Insight comment on the ParcelLock shared parcel locker network: could it work in the UK?

By Frank Proud

The recent announcement by DPD, GLS and Hermes that they are collaborating to develop the ParcelLock shared parcel locker network, a joint venture in Germany, was intriguing. It appears that they plan to roll-out a network which is open to each of them, and also to any other parcel carrier. Dirk Reiche – formerly at the sameday delivery provider, Tiramizoo – has been appointed as ParcelLock’s Managing Director and the venture is currently conducting trials. It’s website says that it is targeting a launch in October.

From the point of view of the consumer, a shared network has a lot of advantages. The obvious analogy is with cash machines – you don’t really care whose it is but you just want to be able to use the most convenient one. However, most recent developments in the parcel shop and locker network area have involved carriers (or as we discussed recently, Amazon) developing their own networks. There have been some carrier-neutral networks such as Kiala in Benelux and France, and InPost and Doddle in the UK, but the former was snapped up by UPS and the latter are understood to be operating at low volumes.

With the backing of three major carriers, which together account for 30% of the German parcels market, ParcelLink seems to be in a much stronger position. It would give its shareholders a network that could rival the very successful DHL PackStations. And it might benefit them in the strategic chess games to be played with Amazon. Perhaps, rather than developing its own lockers in Germany, Amazon might decide to put its weight behind ParcelLock?

Could such a development work in the UK? Firstly our research (European Parcel Shop and Locker Networks Market Insight Report 2015) has found that lockers haven’t taken off in the UK in the way they have in Germany. Also there could be challenges in getting carriers such as the UK arms of Hermes and DPD to on board: Hermes already has a strong parcel shop network and a courier delivery operation that gives it a strong cost-leading position while DPD’s market-leading technology gives it some significant services advantages and it is now rolling out its own parcel shops. So both of these operators might have good reasons to keep the advantages they have over their rivals in home delivery. However, we recently became aware of some work being done by a highly credible team in the UK on similar ideas and await developments with interest




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New Report Shows Growth Continuing in Rent-to-Own Retail market

By Frank Proud

Apex insight has just published a new edition of its report: Rent-to-Own Retail Market Profile and Forecasts.

Rent-to-own, or rent-to-buy retail is a fast-growing segment in the UK, expanding to take up some of the increasing degree of slack on the high street. The rent-to-own retail market consists of high-street shops and online retailers selling larger items along with a credit package which, by spreading payments over a year, is designed to make them affordable for lower income buyers. Categories of items commonly sold include computers / technology, audio / visual, furniture and domestic appliances.

A rent-to-own agreement is a form of secured loan with the goods generally remaining the property of the seller until the final payment is received and a provision for them to be recovered if payments are missed.Loan periods are generally from 1-3 years with an APR of between 30-70% being typical.

The rent-to-own retail market has grown quickly in recent years. Market growth has mainly resulted from store roll-outs, driven by a series of trends which have coincided:
– A significant increase in the number of customers in the sub-prime segments as a result of the economic downturn
– Significant reduction in the appetite of the mainstream banks for serving such customers
– A favourable regulatory environment in the UK
– Retreat of many other categories of retailers from the high street which has enabled some attractive locations to be obtained on favourable terms

The leading companies in the sector are all private-equity owned:
– Caversham, which operates the BrightHouse chain and is owned by Vision Capital.
– Perfect Home, whose shareholders include Cabot Square Capital as well as a leading US rent-to-own operator, Aarons, Inc.
– Buy As You View, based in South Wales, which operates an internet based model and is owned by Rutland Capital.

These leading operators have continued to grow both in terms of revenue and store numbers, although at a slower rate than prior to 2014.

The prospects for the rent-to-own retail market depend to a large extent on the four key drivers outlined above (numbers of target customers, appetite of mainstream lenders to provide alternative forms of credit, regulation and availability of sites). While each of these areas has specific uncertainties and risks which are examined individually and taken into account in our forecast, indications are that overall market conditions are likely to remain favourable and support further store roll-out.

The key area of uncertainty is around regulation. These retailers are frequently criticised for imposing a combination of credit terms and insurances which leads to items being significantly more expensive than via other channels. However, rent-to-own retailers argue that, for many consumers, they make it possible for them to obtain goods which would not otherwise be accessible to them. The FCA is currently reviewing the area, following a study carried out by the All Party Parliamentary Group for Debt and Personal Finance which identified aspects of the market as problematic and in need of tighter regulation. It is possible, but not certain, that the FCA could introduce tighter regulation which could have an adverse effect on the rent-to-own retail market.

The report, Rent-to-Own Retail Market Profile and Forecasts has a free-to-view summary, along with a full table of contents.

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Apex Insight comment on Amazon free delivery to UK click and collect locations

By Frank Proud

In the last couple of weeks, Amazon has made two interesting announcements regarding delivery: firstly that it would stop delivering to Collect Plus locations and secondly that it would offer free delivery to its own network of click and collect sites

The two announcements are clearly connected, with the first clearing the way for the second, and they represent further examples of a trend we have cited in our research on the sector over the last year: Amazon becoming more active in deliveries.

The main threat from the ‘Amazon free delivery’ announcement appears to be to other retailers competing with Amazon to sell books, or anything else, as Amazon has effectively cut its prices a bit more by making delivery free on anything over £20 from its marketplace (£10 from its own store). In part it can be seen as a response to the increasing number of free delivery offers on Ebay, often via Ebay’s partnership with Argos for click and collect.

While it doesn’t really affect parcels companies directly, the growth of ‘free’ tends to commoditise delivery and reduce the appetite of consumers to pay a premium for a quality delivery service. And more volume via click and collect probably means less via home delivery.

Our research (European Parcel Shop and Locker Networks Market Insight Report 2015) has found that lockers haven’t taken off in the UK in the way they have, say, in Germany. However, Amazon is one company that could really change that by driving adoiption of free-to-use models. This announcement confirms that Amazon has made a bit of progress in rolling out its lockers, now reporting that it has 300 locations, and they also have deals with Doddle and Smiths News, but the vast majority of the sites it has are post offices. We’re not sure that picking up a parcel from a post office is a particularly attractive option, given the concerns people tend to have about queues and opening times.

The announcement is most interesting for people who operate parcel shop and secure locker locations, like InPost and Collect Plus. It could be a threat, by promoting a direct alternative (and Collect Plus has clearly lost some Amazon business following the first announcement). Or perhaps it could be good for them in the longer term, by giving further impetus to click and collect and making other internet retailers subsidise ‘free’ delivery to their sites to compete with Amazon.





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New Report Shows Pawnbroking Market Recovery Following Gold Price Fall and Payday Lending Cap

Apex insight has just published a new edition of its report on Pawnbrokers and high street loan stores.

The market consists of high-street shops which offer combinations of pawnbroking and other lending services such as payday and term loans, purchase of second-hand goods including gold jewellery, electronics and other items. Most of the main chains have their roots in one area but there has been convergence with most now offering a mix of these services.

Pawn loans are typically for up to two-thirds of the value of a pledged item. The principal plus fees and interest is repayable on or before the end of the agreement, usually six months later. If the loan is not repaid, the item is forfeit and will be sold to repay the loan. Around 30% of pledges are not redeemed.

While press reports often focus on ‘posh pawn’ involving middle class customers with assets but not cash, interviews suggest it is a small part of the pawnbroking market and research shows that most loans are for either day-to-day spending or household bills.

Store location is very important as most people do not travel far to visit a pawnbroker.

Market Growth

The market grew from 2009-13 to reach well over 2000 stores across the UK. Market growth was driven by:
– A significant increase in the number of customers in the sub-prime segments as a result of the economic downturn,
– Significant reduction in the appetite of the mainstream banks for serving such customers,
– A sustained rise in the gold price in the decade leading up to 2011-12,
– The more favourable regulatory environment for high-cost credit providers in the UK than elsewhere in Western Europe and North America,
– The increase in the supply of suitable sites resulting from the decline of the high street as a mainstream shopping destination.

The pawnbroking market has become relatively concentrated as a result of seven large chains having rolled out their store networks in recent years. The chains include the following:
– CNG Holdings, which operates both the Cheque Centres and Cash Generator high street chains as well as The Loan Store payday loans website, and which has recently closured some loss-making stores.
– Albemarle and Bond which was recently acquired by Promethean Investments after the weakening market impacted its ability to service its debt.
– H&T, the UK’s largest traditional pawnbroking chain, which is listed on AIM.

While traditional pawnbroking activity appears set to continue to grow at a steady rate, with limited regulatory risk, other services offered by pawnbrokers and loan shops have not performed so well recently.
– In the last two years, the reversal in the gold price has led to a significant reduction in the levels of gold buying across the pawnbroking market.
– Payday lending has also come under pressure following the introduction of the loan cap by the FCA.

The report, Pawnbrokers & High-Street Loan Stores: UK Market Profile and Forecast 2015, has a free to view summary, along with a full table of contents.

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Commercial due diligence in the Middle East

By Vincent Schuller

Commercial due diligence to support private equity and corporate investors on transactions can be more an art than a science. In markets like the UK, the US and Western Europe, information on companies and markets is often readily available. Analysing the underlying drivers of a business’ outlook in light of market, customer trends and competition is helped by a healthy dose of data. Analysis therefore turns to more complex issues like robustness of customer relationships, competitive differentiation and other strategic issues relevant to a business’ outlook.

Lack of robust data
Private equity investors looking to acquire businesses in more opaque markets are often faced with greater difficulties in understanding market trends and competitive positioning. The Apex Insight team has supported investors looking at potential targets in countries like China, Russia, the United Arab Emirates and Saudi Arabia, and it has become clear that commercial due diligence in the Middle East needs to be approached differently.

As there is no obligation to file accounts in a tax-free region, conducting due diligence on target businesses requires more primary research and less analysis of readily available market data. The same hurdles exist for business looking to enter the region and are compounded by the highly relationship driven culture, and ownership restrictions.

Primary research
Where data is less readily available, interviews with customers and other market participants are at a premium.

In order to validate business plans, management ambitions and to stress test the quality of company performance, it is often important to conduct interviews, especially where there is little data on the business, customers and markets. In a region, which is more relationship driven than Western economies, this tends to require local introductions and a degree of patience.

Country differences
The Middle East market has some peculiarities, critical for investors in the region to understand. While many investors think of the region as one cohesive region, countries like Saudi Arabia, the UAE, Qatar and Oman differ markedly from each other.

There are significant differences in ownership structures, local hire obligations, business culture, economic underpinnings and demographic profile. The UAE tends to be where regional headquarters are based, Saudi Arabia offers huge untapped potential in many industries and Qatar’s economic ambitions are high. Economic drivers and degree of diversification from oil-related revenues differ as well.

Private Equity in the Middle East
The Private Equity community in Middle East market is developing, but is still small compared to European and American markets. The region is host to a wide range of houses, benefiting from the vast amounts of investment capital in the region. Many of the houses are keen to professionalise and with a more crowded investor market, approach to investing turns to more detailed due diligence.

Our experience of Commercial Due Diligence in the Middle East
Apex Insight Director, Vincent Schuller, spent two years in the Middle East; helping one of the Big Four global accounting firms to develop a Commercial Due Diligence practice. While working in the Middle East, Vincent worked with clients including LVMH, Ericsson, Emap and Thomson Reuters, as well as a range of locally-based organisations.

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Apex Insight comment on the acquisition of the FT by Nikkei from Pearson

By Vincent Schuller

Last week, following intense deal discussions, Pearson sold the Financial Times group to the Japanese media group Nikkei. There was significant interest from other bidders like Axel Springer and commentators believe that the sale price exceeded Pearson’s expectations.

The acquisition of the FT was high profile, and is in line with increasing deal activity in the B2B media sector. The sector has seen a return to selective growth and there are a host of good quality assets around that are being looked at with interest by strategic buyers and increasingly private equity investors as well.

Trends in B2B media
The B2B media sector tends to be cyclical in nature, with spending decreasing sharply when the economy contracts, and recovering with the cycle, though with some lag. Within the sector however, some segments have done better than others. Business information is relatively robust, as are trade shows and academic journals. On the other hand, regional news, newspapers and paper directories have proven less so.

A number of trends are visible, changing the B2B media and especially the B2B information sector. These are providing opportunities for those that adapt their business models or improve how they deliver information and insights to customers:
– B2B media has transitioned from print to online, balancing changing user needs with a need to protect pricing and revenue models. This has seen clear winners and losers but many B2B media and information businesses have come through the transition
– There is a clear trend towards subscription-based revenue models, and this trend continues. Key drivers are a desire for financial predictability, customer retention levels and user expectations regarding content
– The way business users interact with information has changed and data is consumed both on a larger scale and more interactively, in a context of more readily available free information
– As the business world is more and more awash with data, and the value of data in itself is eroding, the value of insights from data is becoming more important. Answers, insights and workflow solutions rather than just data are becoming more important.

B2B media and information budgets among typical clients of the sector have not come back to the highs of a decade ago, but some sectors are seeing some real traction. The financial and health sectors for example seem to have found their taste for market, sector, economic and risk information again.

Increasing deal activity
With the selective return of growth in media and information spend; deal appetite is increasing at media groups like Thomson Reuters, Reed Elsevier, Bloomberg, Springer, Informa and others. This includes both disposing of non-core assets to willing buyers and boosting successful assets to increase share of wallet or geographical reach.

The FT transaction was an example of such a high profile deal showing that strategic buyers are willing to pay for quality B2B information businesses. Alongside the B2B information segment, the B2B events segment is seeing a similar increase in deal appetite.

Private equity firms have shown more limited interest in media deals than strategic buyers over recent years, but some too are now looking for good quality, scalable subscription based B2B media businesses.

Outlook for the sector
At a high level, some B2B media segments are likely to do better than others. Given underlying growth drivers in the end markets, and a continued need for data and insights, the financial and economic segments have a favourable outlook, as do the risk information and health segments.

At a more granular level though, providers that can create “currency” for the customer segments they serve (e.g. ratings, benchmarks), and providers of information critical to their customers’ workflow can be attractive. Getting the business model and the proposition right can make a business stand out in any of the B2B media segments.

Identifying attractive investment opportunities
Those B2B information providers that are able to deliver business information to professionals in innovative ways, integrating into user work-flow and allowing users to interact with the data should be well placed to capture a good share of spend. Those providers that achieve a subscription-based portfolio and meet real demand among their clients should do well.

Given that many quality assets are likely to be contested by media groups and financial investors alike, it is key for investors to understand the real value of a business. Commercial due diligence is a great means for buyers to understand whether a business can prosper in a market environment and competitive landscape. Apex Insight is well places to support both media groups and investors looking to acquire assets in the B2B media sector given the firm’s deep experience in the sector.

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