The predicted stock market flotation of ISS, the global outsourcing giant, has got underway this morning as the facilities management (FM) firm announced it intention to float in a deal expected to raise DKK 8bn (approx £900 million).
The facilities and support services firm has been under private equity ownership for nearly nine years after bought the company in 2005. ISS attempted to float in 2011 but despite being oversubscribed, cancelled it due to market volatility following the Japanese tsunami in March. The investment partners also almost pulled off a deal to sell ISS to global support services firm G4S in 2011 but G4S’s shareholders didn’t support the deal and the firm was forced to pull out of the deal.
Since its acquisition in 2005, ISS has doubled revenue to DKK 78.5 billion (£8.6m) and extended its reach to over 50 countries. The firm has been focused on paying off debt through divergence of non core divisions including some of its international pest control activities resulting in its net debt being reduced from 6.5 times earnings before interest, taxes, depreciation and amortisation (EBITDA) to 4.5 times currently.
ISS is floating on Copenhagen’s Nasdaq OMX due to it Danish roots and heritage and is expecting to raise DKK 8 bn (£878m) primarily in new shares, the proceeds of which will be used to pay down debt. GS and EQT are also expected to partially sell down their holding (currently they own 73%). The two other institutional shareholders, KIRKBI (the investment fund of the Lego family) and Ontario Teachers Pension Plan, who together own 26% will not be selling.
ISS provides on-site facility services, such as cleaning, catering, front of house and security services to the private and public sector. ISS’ main growth levers are its integrated facilities services (IFS) and emerging markets.
One of its more fruitful IFS contracts is with Barclays, which is one of the largest contracts ever signed in the industry. Under the deal, ISS provides various facilities, such as office services, front of house, catering, security, hospitality, cleaning, landscaping, waste management to over 4,925 sites, including corporate offices, trading floors, data centres and banking retail branches, in 40 countries.
The second key growth lever, emerging markets now represents 23% of global revenue, and 57% of the total workforce. In the results today, Asia has delivered double digit organic growth for the 34th consecutive quarter and delivers a higher margin than the group.
The global outsourced facility services market is worth more than US$845bn (£505bn), and no one firm has a global market share above 2%, so the potential to expand ISS’ market share further will be a pull for potential investors.