Put simply, private equity provides investment to grow your business or fund a change in ownership – in return for a share in the company. Unlike raising debt, you’ll also be backed by experienced business partners. Helping you open up growth opportunities without losing control of your business.
The combination of investment and strategic support means partnering with a private equity investor can help you achieve your ambitious growth plans, whether that’s expanding into new domestic or international markets, driving organic growth, targeting complementary acquisitions, or investing in new products and services.
Why Choose Private Equity?
The reasons for choosing to partner with a private equity investor are based on individual circumstances. Common themes include:
Pursue a new growth avenue.
The management team may wish to explore a new avenue to growth but lack the capital
or specific expertise to deliver on it. A private equity partner can offer the investment and experience to kick-on with this growth strategy, such as acquiring a competitor or expanding into a new international market.
Kickstarting a succession plan and supporting a change in ownership.
Private equity is not only a way of driving growth. For some business leaders, it can also provide an opportunity to open up succession plans. For example, this could involve enabling your existing management team to increase their shareholding, which in turn allows other shareholders to divest, either fully or partially.
Helping business owners to de-risk whilst retaining control.
For other business leaders, it can be an opportunity to de-risk and sell a minority shareholding of the business to realise some value, whilst still retaining control. This is often an option for those business leaders who have experienced a shift in their own personal circumstances, or where their plans have changed.
A private equity partner will support your ambition. You know your company better than anyone, and your investment partner should act as an extension of your team – on hand to work by your side to provide expertise, support and capital along the way.
Case Study: Plimsoll Productions
You may not have heard of Plimsoll Productions, but you’ll certainly know their shows. The team behind programmes including John Bishop’s Great Whale Rescue and Tiny Earth, Bristol-headquartered Plimsoll Productions is the biggest independent production house in the UK, with a client base including Apple, Disney and Netflix.
Plimsoll’s management team, led by CEO Grant Mansfield, first partnered with LDC in August 2019 in a transaction that valued the business at £80 million. Grant explains his journey so far:
“Three years ago, I decided to look at investment options for the business. I wanted capital to pursue acquisitions, to give existing stakeholders the opportunity to realise some of the value they had generated in the business and to ensure our talented team remained at the heart of driving growth.
“I spent two months in Los Angeles, talking to around 15 trade buyers – and we had some attractive offers from some of the largest media companies in the world. In our industry, trade sales are the norm, so before meeting LDC I hadn’t considered the private equity route at all.
“But when we looked at the offers we had, they were all predicated on us handing over complete control of the business. I wasn’t ready for that – with private equity, I could raise the investment I wanted while still retaining a majority stake.
“LDC took the time to get to know us. This personal chemistry is key to choosing the investor that suits your business best – you need to spend time with the people who want to back you, and you have to like them and trust them.
“Now, every month, we sit down with our management team and our partners at LDC, and talk through recent developments and where we want to take the business next.
“My advice to other founders? Don’t discount private equity. This has been a genuinely positive both for me and for Plimsoll, and we are on track for great things! With private equity, I could raise the investment I wanted while still retaining a majority stake.”
– Grant Mansfield, Plimsoll Productions
Strategies for Business Growth
The support of an investment partner can help to open up new, or accelerate existing, growth opportunities in many different ways.
Whether you’re interested in expanding internationally or funding business improvements, private equity can often be the catalyst for that change. Here, we take a closer look at some businesses who have been there and done it, and the routes they chose with the support of a committed investor.
Your business is already growing – but private equity can help you to grow even quicker, while maintaining your unique culture. It could be anything from finding new premises, developing new products or rolling out new services or recruiting additional staff.
Long-term support is key to any private equity partnership supporting organic growth, so growth is sustainable, even during the most challenging times.
Case study: Texthelp
What do you do if you’re a college student struggling to keep on top of your workload because of dyslexia or because English is your second language?
Where can you turn at work when you’re being pulled up on spelling mistakes in documents and emails? Texthelp is helping millions of people across the globe grappling with these challenges with technologies that allow them to understand and to be understood.
Today, the company offers solutions to its 40 million worldwide users including literacy support software Read&Write, maths product EquatIO, web accessibility toolbar Browsealoud and writing achievement tool WriQ. Founder and CEO Martin McKay is working towards his ultimate goal to reach 1 billion people around the world with his products.
LDC backed Texthelp in May 2019 to help Martin and his team realise this ambition. “Our existing investors wanted to exit the business, but I didn’t,” said Martin. “LDC helped come up with a structure that would allow me to roll my investment forward, while also reinvigorating the business for the next stage of growth.”
Over the two years that followed, the business invested heavily in product development to drive growth. “Our partnership with LDC helped us to go further, faster. Initially I was a little concerned that a new investor might come in and try to take over, but LDC made it clear they weren’t about to break something that was working well. The team believed in the potential of our business, and our ability to deliver on our plans. They provided the investment, support and expertise to help us accelerate a truly differentiating digital transformation in a relatively short space of time.”
“LDC made it clear they weren’t about to break something that was working well.”
– Martin McKay, Texthelp
Buy and Build
Acquiring complementary businesses can help to create a company that is greater than the sum of its parts, building scale and resilience, and subsequently boosting market share. It can unlock new markets and geographies and add valuable expertise to a growing business.
A private equity partner can work with you to identify businesses that are a good fit, as well support the purchase with funding and expertise, and help deliver a smooth integration.
Case study: Stuart Turner
Founded in 1906, with strong heritage in engineering and product innovation, Stuart Turner is an international market leader in water-boosting solutions. Drawing on over a century of engineering excellence, it has established a reputation for high-quality products in the commercial and domestic markets, including a patented solution for mains water pressure issues.
In 2017, LDC backed the management buyout of Stuart Turner with an investment that is enabling the team, led by CEO Richard Harden, to accelerate its buy and build strategy and target international expansion.
Richard explains he turned his ambitions into reality: “The aim at Stuart Turner has always been to take our market leading knowledge and experience in the residential sector into the commercial building services and industrial sector – and to continue to build our export markets.”
“We found that acquisitions were a great way for our company to achieve rapid growth over a short period, and acquiring complementary businesses helped us expand our offering to customers not just in the UK, but overseas, giving us a real competitive edge.”
“Over the past three years, we have made three acquisitions. All have boosted our access to industry experts and resources, and allowed us to successfully break into new markets and expand our customer base.”
LDC have provided us with follow-on funding to support our continuing buy and build trail, and the sector experience to help us identify and successfully integrate the businesses we acquire.”
– Richard Harden, Stuart Turner
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