Yann Souillard, head of private equity specialists LDC in the south, explains how private equity can offer ambitious management teams new growth opportunities and how to ensure your business is ready for investment.
The South East is home to some of the country’s most impressive mid-sized businesses, with many of them located here in Reading. With the thriving tech hub of the M4 corridor, home to industry giants including Microsoft and Adobe, and a web of innovation around the Thames Valley Science Park, it’s no surprise that firms in the region are demonstrating ambition on both a regional and national scale.
However, for many companies, achieving long-term goals can be a real challenge without the right support in place. This is where private equity can prove transformational. There are a myriad of funding options available for management teams looking to accelerate growth, from debt to equity financing, but it is the broader benefits of private equity that add the most value. As well as an injection of capital, companies benefit from the experience, strategic guidance and insight that a private equity partner can provide.
The starting point for any management team hoping to secure investment should be to develop a watertight business plan and growth strategy. This consists of a clearly defined plan to achieve the firm’s growth objectives, as well as detailed revenue and profit forecasts. Being able to demonstrate how funding will help achieve those growth objectives – such as investing in new equipment, new facilities or growing through acquisitions – will really bring the plan to life for potential investors.
Electronic testing group Microlease did exactly that. It came to LDC with a clear strategy in order to grow into an international firm with scale. During LDC’s 10-year partnership the firm’s management team bought and integrated six complementary businesses in the UK, US and Europe. As a result, revenues grew from £17 million in 2006 to more than £100m in 2016.
Establishing a relationship with potential investors as early as possible will also provide a robust foundation for a successful future partnership. Every business is different, so private equity investors will take time to understand the management teams’ aspirations, values and vision for the future. Whether it’s breaking into new sectors or expanding overseas, having a clear understanding of this from the outset will help management teams and their investors hit the ground running come the first day of their new partnership.
A great example of this is our longstanding relationship with the management team of Paladone, the UK’s leading designer, innovator and supplier of gift products. Led by managing director Graeme Carr, Paladone had already established a strong foothold overseas, with partnerships with global brands including Walt Disney and Warner Brothers and was looking to further accelerate international growth.
Having a long-term relationship and detailed understanding of the business has been crucial to the success of our partnership to date, which has seen us provide £13m to support its growth strategy. Through our relationship we introduced two non-executive directors and a finance director to Paladone’s management board to support it ahead of our investment. We are now helping the business explore further opportunities in Australia, Asia and Europe, as well as enhancing its online platform to further drive sales.
The best results are driven when investors work in partnership with an ambitious and capable management team that is passionate and buys into the future strategy of the business. Investors back the people they invest in, so showcasing your top talent that are responsible for driving the business forward, instils confidence in a management team’s ability to deliver on its plan.
ByBox, the software and supply chain management company based in Didcot, is a prime example of this. Led by Stuart Miller, who co-launched the business in Silicon Valley back in 2000, its high-calibre management team impressed us from the outset with their determination and energy to push the business forward. We provided £37.5m of development capital in 2016 which supported its international expansion, opening a new office in Burlington Massachusetts and satellite offices in Atlanta and Denver. ByBox doubled in value over the lifetime of our investment, and in September 2018 we sold the business in a £221m sale to US-based private equity specialist Francisco Partners.
Despite unprecedented levels of economic and political uncertainty, businesses in the south of England have remained resilient. In 2019, they will continue to have opportunities to grow with the right business plan and support. We anticipate a rise in buy and build opportunities, particularly as more firms look to carve out units to concentrate their focus on core operations.
At LDC, we know the significant difference an injection of capital can make to a business which is why we are committed to investing £1.2 billion in ambitious medium-sized businesses nationally over the next three years. Our through-the-cycle approach to investment can be vital towards supporting management teams in continuing to grow their businesses during the ongoing uncertainty.
We are looking forward to another exciting year for mid-sized business growth in the region. For the business leaders in Reading and the south with big ambitions, the backing of a private equity investor can provide the essential financial support and strategic partnership to help turbocharge a business’s growth strategy.
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