Tis best to weigh the enemy more mighty than he seems
(Henry V, Act 2)
Even a few years back, a facilities management team buying a TIC one would have been unthinkable. But Mitie is aiming to do just that with their recommended bid for Marlowe plc.
Here’s a little detail that’s probably being overlooked though:
Mitie uses Safecontractor in safety supply chain certification.
APAX are CHAS/Veriforce’s backers, as well as SafeContractor/Alcumus
Thoma Bravo (TB) bought CHAS and sold it a year later to APAX.
TB run Coupa, the software team used by Mitie for their supplier management framework (SMF).
Over 76% of the safety supply chain certification market in the UK is not only owned by PE teams, but the big beasts - these guys deal in trillions as often as billions (and they all deal in billions in terms of Assets Under Management). There’s been a (not so quiet now) feeding frenzy in supply chain certification. It broke cover when Thoma Bravo paid £185m for CHAS, but it covers certifiers, consultancies, software teams, and all points in between. Scratch the surface of any deal here and you’ll find the PE financial model driving it somewhere.
So what?
Well, many big firms still run their own systems; and it’s getting easier to do so too.
There are the institutional plays from BSI, NFDC, NHBC, RSSB, SCCS...
The consortia, often housing and public sector based, like LHC, NHC.
There’s HSE endorsed SSIP, and schemes like Considerate Constructor,
and of course, the big brands in Veriforce/CHAS, Safecontractor, OnceForAll/Constructionline, SMAS and a couple of dozen others.
Safety supply chain certification is a £200m sector in the UK.
It is one of the highest growth, most profitable, and sits smack bang on the boundary between TIC and GRC services sectors.
So do the software platforms have the whip hand?
Can the scheme/chain/framework owners with 50-70k contractors signed up dictate terms?
Does it take 1, 25, 50 or 2000 ‘clients’ to make a scheme secure?
What teams like Mitie decide to do with their contractor risks is pivotal.
Your non-exec should be asking your Board:
When does over-certification damage a supply chain?
Can the enterprise software model replace the contactor-funded one?
Are deemed-to-satisfy systems keeping it honest or enabling more complexity (and price)?
There are cautionary tales here too.
The Achilles story is one such, and others come from the food safety certification sector where they’ve been at this even longer than construction teams have. There are fundamentals to the PE business model that can be exhilarating when they get it right, but really painful when they don’t.
It makes these big PE brands if anything more challengeable than their old-school precursors. Dealing with big PLCs in the past was always a supply-side economics arm wrestle. PE teams throw sprints at quick fixes, and even though these have stretched now to 5-7 years instead of 2-4, the fundamental fight is whether contractors can be expected to stomach ever increasing administrative burdens?
Simply put, any market that routinely returns 60% profitability is vulnerable. And yes, it is simply a matter of time. What’s not clear is whether the client/buyer power will be restored by tech plays, whether non-profits will grow a pair (dpn’t hold your breath), or whether contractors find some market muscle too with disruptive plays. Needless to say the PE teams already hedge their bets and they have assets managed in each of these constituencies…
You decide - as these are all strategic plays being hit with multi-million investments currently. You need the facts - the t2i ‘deck’ summarises vast amounts of real data to give you what you need - confidence in your choices. Start with the t2i deck on Safety in Supply Chains…