Supercharging tech companies through private equity partnership

Chris Baker, investment director at LDC in the south, discusses the Thames Valley’s thriving tech sector and how private equity is supercharging the growth of tech firms across the region.

The Thames Valley is coined as the UK’s Silicon Valley with more than 8,000 technology-led companies in the region, many of which are at the cutting-edge of innovation. The region has quickly emerged as the country’s most exciting tech cluster, with a 2018 report by national entrepreneur network Tech Nation indicating that the region generates almost £14 billion in turnover from digital technology and is responsible for over 58,000 jobs.

With easy access to major transport hubs and home to leading universities, the area has proved to be a magnet for talent and investment – with world-leading tech firms including Microsoft, Oracle, Huawei, Cisco Systems and Symantec having all made the Thames Valley their UK base in recent years. And with industry giants rolling out initiatives such as the Microsoft Ventures start-up accelerator programme to help nurture home-grown talent, a diverse crop of innovative businesses are also flourishing. For businesses looking to scale quickly and invest in growth infrastructure, the right private equity partner can be the perfect support to help realise their value creation strategy.

The rapid pace of change, early adoption of innovative technologies and ambition to grow are common characteristics among these business – and this is proving attractive to investors. According to the latest figures from KPMG, investment in the UK tech sector increased in the first six months of 2019 – up 66% in value compared to the latter half of the previous year.

At LDC, we know the difference the right private equity partner can make to a growing tech firm. We have invested £875 million into 110 tech-focused businesses, with more than £200m of equity invested by the Thames Valley team into 10 tech companies in the past seven years alone. Our current tech portfolio includes 23 companies, generating £775m in combined revenues and employing more than 3,600 people. In the south, LDC is currently supporting a wide range of management teams of tech businesses, including leading HR software firm CIPHR, telecoms provider Onecom, tech-enabled RPO provider Amberjack and communications software reseller Babble.

Since establishing a presence in the Thames Valley almost 20 years ago, we’ve witnessed the tech landscape evolve and seen first-hand how fast they can grow with the right support of investment and expertise.

A fantastic example of this is our partnership with specialist smart locker technology and field services solutions business, ByBox. We originally invested in the business in 2016, backing its management team to drive international growth and invest in its proprietary technology.

This led to it launching a new office in Burlington Massachusetts, as well as two satellite offices in Atlanta and Denver, plus growing its UK-base. As a result, ByBox doubled in value and last year was sold in a £221m sale to Francisco Partners.

Similarly, we partnered with customer experience and unified communications provider Connect Managed Services in 2014, to accelerate its expansion. Our strategy was to grow through acquisition, and working in partnership with its management team, we supported the business through several acquisitions which helped to scale it at pace – revenues tripled from £9.7m to £30m for the year ending in December 2018, with headcount increasing by 225 %. Five years on, we exited our investment to G3Comms, creating one of the UK’s largest customer experience and unified communications specialist groups with combined revenues in excess of £55m.

Earlier this year, we invested £17.6m of equity into Newbury-based Amberjack, which manages complex graduate and early careers recruitment campaigns for high-profile clients which include members of the Big Four, Unilever and Liberty Global. By using cloud-based software tools to automate processes, manage application volumes and provide data driven insights, Amberjack’s tech-enabled services provide a high level of sophistication to ensure that leading organisations continue to attract the brightest talent. As well as cementing Amberjack’s market-leading proposition, the investment will also enable the business to support the country’s leading companies to identify the next generation of talent.

Our investment in Amberjack builds on the Thames Valley team’s track-record of backing high growth SaaS businesses CIPHR, Property Software Group and Clifford Thames. Software and software-enabled businesses are an area where we have deep expertise and an exceptional track-record in creating value for management teams, and so it is no surprise that we are continually evaluating new investment opportunities with these types of businesses.

Our appetite to invest and support remains as strong as ever – which is why we’ve pledged to support the ambitions of Britain’s mid-sized businesses with up to £1.2b of equity over the next three years. As one of the most vibrant places in the UK to invest, Reading and the wider Thames Valley region will be a key focus for us in delivering on commitment.

 

ldc.co.uk