Eddyfi in Quebec expands global reach with back-to-back acquisitions

Mark Lowey
February 26, 2020

Eddyfi has made two acquisitions within a week that significantly expand the Quebec City-based tech company’s capability and reach in the fast-growing global market for non-destructive testing technologies and services.

Eddyfi, through a strategic partnership with private equity firm Novacap and institutional investor Caisse de dépôt et placement du Québec, along with third-party debt financing, earlier this month acquired NDT Global. Headquartered in Ireland, NDT Global is an ultrasonic pipeline inline inspection and data analysis supplier for onshore and offshore pipelines worldwide.

Then, Eddyfi announced last week its acquisition of Halfwave, headquartered in Norway. Halfwave owns a proprietary ultrasound-based technology and is active globally in subsea inspection and pipeline inline inspection.

The back-to-back acquisitions more than double the Quebec company’s business, to over 1,000 employees working in more than 20 global offices and serving customers in 110 countries, says David Lewin, senior partner at Novacap.

“There’s really very little overlap and a lot of complementary footprint that expands our reach internationally, as much in Europe as in North America and Asia,” he told RE$EARCH MONEY.

Eddyfi builds and sells non-destructive testing devices and software, while NDT Global services proprietary non-destructive testing technology for end customers, Lewin says. “What’s important is that they’re catering to two different markets. Their combination widens the scope of the business and total addressable markets.”

Non-destructive testing equipment is used to evaluate and inspect various properties of materials, components and assemblies, in such sectors as oil and gas, manufacturing, aerospace and defence, construction, automotive and power generation.

The global market for non-destructive testing technologies and services is expected to reach US$24.3 billion by 2027, expanding at 6.5% annually, according to a report by Grand View Research Inc.

Cash flow key to obtaining debt financing

Lewin says Novacap already understood the non-destructive testing technology market, through a separate previous investment in Calgary-headquartered Onstream Pipeline Inspection Services. Novacap also was familiar with Eddyfi’s business and its CEO Martin Theriault, being “next-door neighbours” in Montreal and Quebec City, Lewin says.

When Novcap heard that NDT Global was in a sales process, “We presented that opportunity to Martin and his team and collectively we were able to get introduced in the sales process, with Caisse de dépôt et placement du Québec.” Lewin says.

Eddyfi-NDT obtained $163 million in equity financing from Novacap, while Caisse de dépôt et placement du Québec invested $107 million.

The equity investment is combined with new debt financing provided by a banking syndicate led by National Bank of Canada and additional debt from Investissement Quebec. More than $600 million was raised to complete the NDT Global acquisition as well as pursue other strategic opportunities.

As for the debt financing part of the deal, such funding can sometimes be difficult to obtain in Canada for tech companies. Some fast-growing tech firms are less concerned about cash flow and more focused on reinvesting revenue in sales, marketing and technology, to quickly grow market share as much as possible, Lewin says.

However, “Traditional lenders are really going to be focused on cash flow and cash flow management,” he notes. “When you look at the Eddyfi-NDT combination, it really is a business that’s experiencing meaningful growth, but with a very healthy cash flow margin.”

Going forward, Novacap, Eddyfi-NDT and their co-investment partners want to offer a portfolio of premium technology and services that cater to the needs of end customers within the overall market, Lewin says. “When we’re looking for potential MNA acquisitions, we’re going to be looking at adding capability and technology to our existing offering . . . we’re super excited about the future.”


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