Investment committee paper on Applus+ - return analysis

Abstract

This paper examines Applus+ Services, S.A. within the context of a potential acquisition by a financial sponsor, specifically a private equity fund. The analysis focuses on strategic initiatives aimed at enhancing growth and profitability within the Testing, Inspection, and Certification (TIC) industry, a critical sector that ensures safety, quality, and regulatory compliance across global markets. By implementing a targeted approach that includes product mix realignment, operational improvements, and strategic acquisitions, Applus+ is poised to strengthen its presence in high-margin segments such as Laboratories and Non-Destructive Testing (NDT). Furthermore, the company's ability to capitalize on key industry megatrends, including sustainability, digitalization, and globalization, positions it as a compelling investment opportunity to generate sustainable value creation and attractive returns for investors. The transaction is structured as a Leveraged Buyout (LBO), with the individual part being the return analyses, focusing on growth projections and exit strategies to maximize returns. The model includes realistic growth forecasts for divisions like Renewables, Aerospace, and Laboratories, considering Applus+’s market position. The recommended exit strategy involves strategic acquisitions and potential divisional sales to competitors like SGS and Bureau Veritas. A 2029 exit is projected to deliver strong returns, with an IRR of 24% and a MoM of 2.9x, driven by organic growth, margin expansion, and targeted acquisitions, while managing risks related to market volatility and operational uncertainties.