Opinion
Private equity with purpose helps the UK economy to grow
19 May 2023
As featured in The Business Magazine.
Raising funds is challenging for every business, whatever their size and place in their growth lifecycle.
Start-ups and scale-ups often grab the headlines, but it’s the small and medium-size enterprises (SMEs), which form the backbone of the UK economy.
SMEs currently make up more than 99 per cent of all UK businesses and helping them grow drives the UK economy and makes it more resilient.
For 40 years, LDC, a private equity investor which is part of Lloyds Banking Group, has been supporting just such growing businesses in all regions and all sectors.
Since 2012, LDC has invested £4.1 billion in SMEs and at any one time works with around 90 portfolio companies.
Lawrence Dean is Head of LDC’s South Team, which is based in Reading. He said: “Our role is to take SMEs to the next level because that growth is critical and it’s important to back innovation. Our parent company, Lloyds Banking Group, sees them as a core of the UK’s growth economy.”
LDC typically invests between £10 million and £50 million in a growing SME for either a minority or majority stake and makes follow-on funding available to help that business continue to grow.
This approach is working. Since 2012, the businesses which have secured LDC investment have grown more than four times the average thanks to the experience, support and funding provided by the private equity investor.
Giving management teams the confidence to grow
“We often meet SMEs businesses whose management teams have worked incredibly hard and at pace for years to build their business,” said Lawrence.
“When they start to talk to us, we encourage them to see that how important it is to start investing in technology, systems and people which will help their businesses grow – and leverage the experience and expertise around them. Private equity investment can give management teams the confidence to invest in the next stages of growth.”
Over the last three years, LDC has invested in companies which have gone on to double their head count from fewer than 100 people to more than 200.
Building relationships in local business communities
LDC works within its communities. “We have always taken time to build relationships within our local business communities,” says Lawrence.
“We are lucky to have well-established offices across the country. I look after the South of England from our office in Reading, but my team and I are always out and about, visiting towns and cities from Bournemouth to St Albans and into Kent.
“That approach really helped over the last two or three years, when a lot of other investors were less active. We could leverage existing relationships to ensure that businesses could continue to access capital from us through the pandemic.”
LDC invested in Oxfordshire-based cloud technology company Aker Systems two weeks into Covid.
“Aker was undertaking vital cloud data migration work for government departments when there was a lot of focus around securing crucial data during the first part of the pandemic. The business grew 50 per cent during our investment,” said Lawrence.
LDC is also regularly recommended to businesses from advisers. “LDC has always had a positive reputation in the market for investing through the cycle,” added Lawrence.
Taking the longer view on investing
While the sweet spot for Lawrence’s team over the last few years has been the technology sector, there have been equally successful investments in businesses taking a more disruptive approach in traditional sectors.
“How long we invest all depends on what’s best for the company we’re working with,” said Lawrence. “We are flexible in how long we stay involved, and as part of Lloyds Banking Group we can take a longer view. On top of that we don’t have to worry about fundraising cycles in the way that other private equity funds do. We can remain supportive partners in the challenging as well as the good times.”
Since the pandemic, the economy has slowed down, but that doesn’t deter LDC.
“Where we see businesses, irrespective of sector, which are in growth but need funding support, we try to help them.”
Our role is to take SMEs to the next level because that growth is critical and it’s important to back innovation. Our parent company, Lloyds Banking Group, sees them as a core of the UK’s growth economy.”
Successful partnership with LDC helps FSP double revenues and headcount while maintaining its people-centric focus.
Headquartered in Reading, FSP is an award-winning provider of digital transformation services to large enterprises and public sector organisations. Private equity partner LDC first invested in the business in December 2020 for a minority shareholding. The investment backed the existing management team, led by CEO Simon Grosse, to continue to grow the business.
During an initial two- and half-year partnership, the business more than doubled revenues and headcount whilst being recognised for its people-centric approach in a number of awards programmes, including placing first in three separate Great Place to Work UK® Best Workplaces™ league tables.
In February this year, LDC exited its investment to CBPE, whilst reinvesting for a minority stake to continue to support the growth of the business. The transaction enabled FSP’s simultaneous acquisition of leading cyber security consultancy Savanti, a company identified by LDC and introduced to the FSP team.
With strengthened cyber services and an expanded investor base, FSP plans to continue investing in its suite of services as well as making further strategic acquisitions to accelerate its scale and customer base.
Lawrence Dean said: “When we met FSP the year before we invested in them, they were a small business with big ambitions. We were able to offer them the support at the time they needed it to help them grow.”
