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Onsite Rental IPO - Still on the acquisition led growth path, despite the recapitalisation

Onsite Rental, a provider of B2B equipment rental services, plans to raise around US$250m in its Australian IPO, as per media reports. While the company has released its pathfinder and the date by which it plans to list, 18th Nov 2019, it hasn’t revealed any pricing details.

The company’s pro forma numbers point to steady growth and consistent margin improvements. While the industry outlook, though not very rosy, appears to be steady, at least for the next few years.

Onsite seems to have had a bit of a chequered past in terms of its acquisition-led growth via its Private Equity (PE) investors, Next Capital, which ultimately resulted in Onsite having to undergo a recapitalisation. In addition, media reports indicate that the previous PE owners had made several attempts to sell/list the business over 2012-14, while the going was good.

While the PE investors are now gone, the company’s growth strategy seems to have remained the same, i.e. to acquire smaller companies to grow its geographic presence and its customer base. Whether this will end up taking the company down the same path remains to be seen.

Even though recent acquisitions account for a large chunk of the revenue growth, the company has failed to provide details around the acquisitions. Most pointers seem to indicate that the acquisitions were done at a low EV/Rev multiple, much lower than what the sell-side seems to be attributing as fair value for Onsite.

Given the sluggish ECM sentiment down under, owing to two deals having recently been pulled, we aren’t too positive on Onsite’s prospects either. In this report I’ll talk but some of the above aspects of the deal.

If the deal does manage to make it through with a size of more than US$100m, I’ll follow-up with another note.