Cupola seeks targets in fire safety sector

Cupola, the Swedish provider of fire safety products and services, is in talks with targets with a view to consolidating a fragmented market, Jan-Olof Svensson, founding partner of PE-backer Pamica, said.

The sponsor is looking to spread Cupola’s digital solutions across Sweden, Svensson said.

Potential targets are companies that know local fire safety authorities, he said. As building these connections takes time, Svensson said, Cupola cannot simply establish itself in a new geography, and will rely on acquisitions to expand across Sweden.

In a highly fragmented market, targets with turnovers between SEK 20m – SEK 30m (EUR 2.1m – EUR 3.2m) are considered large, Svensson said. Cupola will be interested in such acquisitions, but expects most to be between SEK 5m – SEK 20m.

These businesses can benefit from Cupola’s digital solutions which send reminders to customers to service their fire safety equipment, he said.

The SEK 150m turnover company is looking to expand in northern Sweden as well as Skåne, Östergörland and some areas on the west coast. It is not looking outside Sweden now, however it plans to consider international expansion before Pamica exits.

Many small firms in the sector are run by ex-firefighters, Svensson said, as new legislation in 2004 opened the market to private fire safety providers.

He named Cupola’s main competitors as market leaders Presto Brandsäkerhet, Dafo Brand, and Anticimex.

Acquisitions have been vital in creating Cupola, Svensson said. With a turnover of just under SEK 50m, Brandsäkra Hem was the largest buy. The company has just held its first post-acquisition board meeting, so has yet to decide on an allocated M&A budget, he said.

Pamica will exit Cupola in four to six years, Svensson said, and is open to all forms of exit. It does not have an M&A growth target before exiting, but aims to grow between 6-8% organically.

The market is ripe for organic growth, Svensson said. Many public buildings and landlords fail to live up to fire safety requirements, he said. Fire safety is segmented into three parts, he said, namely before, during and after a fire. Most places have reasonable provisions for before and during the fire, Svensson said, but preparations on how to look after the injured in the aftermath of a fire are often lacking.

There is also growth potential in companies that service fire safety equipment such as extinguishers and fire blankets, he added.

by August Graham, Merger Market