Despite revenue growth ensuring Ritchie Bros. Auctioneers Inc. (TSX:RBA) (NYSE:RBA) performed as one of B.C.’s fastest-growing companies over the past five years, there was at least one bid this year it couldn’t follow up on.
British regulators recently rejected the Burnaby company’s biggest acquisition initiative in years as Ritchie Bros. sought to make a foray into the European market. Its sky-high revenue growth might have to take a breather as a result.
Ritchie Bros. is best known for facilitating sales of heavy equipment and trucks through live auctions and online bidding.
Revenue reached $1.78 billion in fiscal 2021, representing growth of 40.8 per cent over five years. That was enough to place it No. 81 on BIV’s list of the fastest-growing companies in B.C.
During that five-year period, the auctioneer replaced its CEO, hiring Philadelphia-based Anne Fandozzi, and its chief financial officer, among other significant changes to its C-suite and board.
Ritchie Bros. also went on an acquisition spree beginning in 2020.
Its first target was U.S. data intelligence firm Rouse Services LLC, which it bought for US$275 million ($351 million) in October 2020 before ponying up US$175 million ($224 million) for Connecticut-based SmartEquip Inc., which specializes in helping companies acquire equipment parts for large fleets and managing equipment services.
But its biggest acquisition target saw the company making a foray into the European market in August 2021 when it agreed to pay £775 million ($1.2 billion) for Euro Auctions UK Ltd. in a bid to expand its global footprint.
“This acquisition significantly accelerates our strategy to drive revenue and earnings growth and add shareholder value by continuing to expand our capabilities in new channels, sectors, regions and customer segments,” Fandozzi said in a statement at the time.
But by the winter, the U.K.’s Competition and Markets Authority (CMA) was wary enough about the deal that it referred it to a second phase of review.
The CMA said in its March 4 decision the acquisition would result in a “substantial lessening of competition” within the U.K., noting that Euro Auctions and Ritchie Bros. are the country’s two largest suppliers of auction services for heavy machinery and would face “no other significant competitors” following the acquisition.
“This merger will be referred for an in-depth investigation unless Ritchie Bros. Auctioneers Incorporated offers acceptable undertakings to address these competition concerns,” the CMA said.
It appeared those undertakings were too much for Ritchie Bros., which followed up and announced it did not believe there was any realistic prospect for the CMA to approve the sale.
“I was very disappointed by the decision taken by the CMA to refer the proposed acquisition to a phase two review and respectfully disagree with their very narrow definition of our collective market,” Fandozzi told investors in a May 10 earnings call.
The CMA determined the combined companies would have possessed up to 95 per of the U.K. market based on the gross transactional value of sales.
The all-cash deal would have seen Ritchie Bros. acquire 100 per cent of the British firm’s portfolio of companies.
Despite the deal not going through, president and chief operating officer Jim Kessler told investors that other auction players may fit Ritchie Bros.’ needs when it comes to expanding the business.
“It’s important to understand that there’s plenty of things to buy out there,” Fandozzi said during the May earnings call. “We’re looking for a very good business, but we’re looking for something that will enhance our capabilities geographically.” ■
