Frazer is based in the Nordic region with operations in Denmark, Finland, Norway and Sweden and serves businesses, schools, hospitals, care homes and the armed forces.
Compass calls it ‘a very attractive acquisition’ which will strengthen its own offering in the Nordic region and will cover its capital by the end of the second year of full ownership.
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In the year to 30 April, Frazer generated nearly €600m of revenue and €40m of earnings before interest, tax, depreciation and amortisation (EBITDA), meaning that Compass is paying quite a low multiple of sales and profits for a well-established business.
Analysts at Killik & Co describe the deal as ‘a sensible acquisition of a business that is complementary to its existing operations and which will expand its European presence’.
Compass has already raised its full year sales guidance after revealing a better than expected set of first half results last month.
Even before cross-selling opportunities this acquisition will add another 2% to 3% to annual revenue meaning analysts will have to increase their forecasts again.
Assuming that Compass can also lift Frazer’s EBITDA margin of 6.7% towards its own average of 7.5% there is also scope for an increase in earnings forecasts.