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‘Important Decade for Private Equity’ as LDC commits to back more SME firms
12 Jan 2021
The private equity industry has a unique opportunity to accelerate the UK’s economic recovery in the coming decade and contribute to the government’s levelling up agenda, according to LDC, the UK’s leading mid-market investment firm.
Speaking as LDC provided an annual summary of its performance, its newly appointed Chief Executive, Toby Rougier, said that supporting the growth ambitions of the UK’s small and mid-sized companies “in every corner of the UK” would remain its “primary purpose”.
Mr Rougier, who joined as Chief Executive earlier this month, also re-affirmed LDC’s commitment to invest £1.2bn of equity over the next three years. He added that he expected to increase annual investment levels in 2021 as more SMEs looked to return to growth and larger corporates looked to divest subsidiaries to strengthen balance sheets.
The firm, part of Lloyds Banking Group, invested more than £240m in 14 new investments last year, continuing its commitment to UK SMEs despite a market-wide slow-down in UK private equity investment due to the Coronavirus outbreak and resulting economic uncertainty.
Investments included commercial vehicle accessories maker Rhino Products, e-commerce fulfilment provider James and James, pensions support specialist Ross Trustees and cloud-based technology experts Kerv.
It also worked closely with portfolio businesses to help them grow through ‘buy and build’ strategies, providing follow-on capital to support 35 bolt-on acquisitions. Transactions included telecoms group Onecom making two acquisitions in the last six months, residential lettings firm Linley & Simpson marking its 18th acquisition under LDC’s stewardship, and MSQ Partners completing the public-to-private acquisition of the Be Heard Partnership.
LDC, which marks its 40th anniversary in 2021, also said it had continued to source strategic buyers for some of its ambitious portfolio, including the sale of chilled savoury pastry manufacturer Addo Food Group to PAI Partners, global education technology business Texthelp to Five Arrows and
Panther Logistics to US-based AIT Worldwide Logistics.
Working in partnership with portfolio management teams, last year the firm generated £875m in proceeds, with an average money multiple of 3.6x and IRR of 57 per cent.
Commenting on its performance, Mr Rougier said: “Last year was about supporting and strengthening our portfolio firms as well as driving new investment and exit opportunities.”
To deliver almost 50 investments and portfolio company acquisitions speaks to the success of our investment strategy, the resilience of our portfolio and tenacity of our teams. It also serves as a reminder that, for all the challenge and uncertainty, there are opportunities across the economy that private equity can help to unlock.”
“The performance of those investments we exited in 2020 meanwhile demonstrates the success of our approach to back ambitious management teams, invest in growth and add value during our partnerships.”
Of the companies LDC sold in 2020, the average hold period was 4.4 years, whilst management teams achieved an average sales and profit (EBITDA) growth of more than 2x during their partnership with LDC.
Mr Rougier added: “SMEs have always been the backbone of Britain’s economy – ensuring there is a recurring and reliable supply of private capital to back their growth ambitions remains our primary purpose, especially with uncertainty continuing into 2021 for many businesses.
“As well as helping accelerate the UK’s recovery, private equity has the opportunity to drive economic prosperity in every corner of the UK. We also have the ability to positively influence the environmental, social and governance contribution of the businesses we back.
“This is a landmark moment for the private equity industry to contribute economically whilst driving positive and lasting change.”
The firm also said its existing partnership with The Prince’s Trust – which aims to help young people across the UK to explore and launch their own business through start-up grants, volunteering and mentoring – would be an even bigger focus in the year ahead.