RS Group is pleased to announce an agreement to acquire Risoul y Cia, S.A. de C.V., a family-owned distributor of industrial and automation product and service solutions in Mexico, for a cash consideration of $275 million on a cash-free and debt-free basis.
The consideration represents an acquisition multiple of c. 12x adjusted EBIT on a 12-month basis to June 30, 2022.
Strong Strategic Alignment
The acquisition of Risoul delivers on the group’s strategy to accelerate organic growth through high-quality inorganic opportunities that expand its geographic reach, extend targeted product adjacencies, and develop product and service solutions. The company is excited about deepening its presence in Mexico and having a strong platform to expand into Latin America, a region which could benefit from nearshoring due to de-globalisation and a greater focus on improving sustainability through reducing the distances products travel.
Risoul is a leading distributor in Mexico, a highly fragmented market, with almost 50 years of operational knowledge and automation expertise. Risoul sells a range of branded products and is the largest authorized Rockwell Automation distributor in Latin America — and the 10th globally — with rights to distribute Rockwell’s products in the main industrial areas of Mexico and recently launching intSpain. Risoul also provides several service solutions including onsite product training, control board and panel assembly, air conditioning maintenance, specialist tool repair and a smart network infrastructure service.
Risoul is led by Chief Executive Officer Gerardo Ayala Guarneri, who has been with the company for 18 years, the last five as CEO. Risoul, like RS Group, believes that having an engaged and motivated team is critical to delivering success. There is a strong emphasis on training and ensuring the health and wellbeing of its people, demonstrated by a high employee engagement score.
Compelling Financial Rationale
The acquisition is expected to deliver significant revenue synergies. Combining Risoul’s established presence in Mexico with RS Group’s range of complementary and ancillary products, including our main own-brand RS PRO, will support increased average order value for existing customers. We will develop Risoul’s digital presence to increase customer reach and offer a broader product range while improving execution capabilities and driving efficiencies. We expect the combination to greatly enhance prospects for employees, customers and suppliers of both organizations.
For the year ended Sept. 30 2021, Risoul generated revenue of $166 million and EBIT of $19 million. Over recent months, revenue growth has been held back due to interruptions in supply which has led to an increased order book which should unwind over the next 12 months. The acquisition, which will be financed from RS Group’s existing debt facilities, is due to be completed by November 2022, subject to customary closing conditions, including Mexican antitrust. It is expected to be accretive to adjusted EPS in the first full year of ownership and exceed group cost of capital within three years. Following the acquisition, RS Group’s balance sheet will remain strong, with pro forma net debt to adjusted EBITDA (for the year ended March 31, 2022) of <0.8x, which provides the capacity to continue driving our growth ambitions.
“We are accelerating our organic growth with bolt-on acquisitions that meet our key strategic, financial and cultural criteria," said RS Group CEO Lindsley Ruth. "Risoul enables RS to expand our position and execution expertise in the Americas, specifically in Mexico and the rest of Latin America, and drive cross-selling synergies across our product and service solutions offer. As part of RS Group, Risoul will benefit from our digital capabilities and international scale, providing an opportunity to expand beyond its existing strengths, while creating new capabilities. We are excited about the growth opportunities we see as part of our Journey to Greatness and welcome the Risoul team to the RS Group.”
“The Rockwell model has helped build our business and reputation in our market. It is not just about selling products; we are also providing value-added product and service solutions that help customers run their businesses," Guarneri said. "Our product specialists and sales engineers, who have a great deal of commercial and technical knowledge and experience, can recommend and install efficient and productive processes and technology. RS Group brings extensive digital expertise, strong execution knowledge and global support, allowing us to extend our customer reach and accelerate the growth ambitions of our winning Risoul model.”
Rockwell Automation also welcomed RS Group to its partner network.
“Rockwell is delighted to expand its partnership with RS Group into Mexico. We are confident that the pairing of RS Group’s omni-channel capabilities with Risoul’s established strengths with Rockwell Automation solutions will represent a winning formula," said Ariel Bursztein, market access director, Latin America, Rockwell Automation.