YFM Equity Partners supports an investment into EIKON, a leading end-to-end digital post-production services provider

09 April 2018

Funds advised and managed by YFM Equity Partners (“YFM”), the specialist private equity fund manager have backed an investment into Eikon Group Limited, a cutting edge, end-to-end, digital post-production services for the motion picture and broadcast industry.

YFM’s investment comes from its two advised VCTs, British Smaller Companies VCT plc and British Smaller Companies VCT2 plc alongside the YFM Equity Partners 2015 Co-Investment LP.

EIKON Group Ltd was founded in 2014 by Peter Wright (CEO), Richard Fish (Commercial Director), Rick Corne (Innovations Director), Jon Gardner (Operations Director) and Russell Wetherell (Creative Director).

EIKON Group have cutting edge technology facilities in Soho, London and Burbank, Los Angeles, offering digital mastering and localisation to the film, broadcast and online media industry. Clients include Paramount Pictures, Twentieth Century Fox, Sony Pictures Entertainment, Warner Bros, Universal Pictures, CBS and Netflix.

Now in their fifth year, EIKON have doubled revenues year on year and have grown from a staff of 6 to 100. Having recently finalised a lease on a new 20,000 square foot building in Los Angeles, growth is expected to continue at the same rate as the company develop current core business revenues and extend service offerings within the entertainment industry.

EIKON have developed world leading systems and workflows across multiple entertainment service lines in the entertainment industry. They oversee the mastering and localisation of major studios worldwide feature film releases to cinema, trailer campaigns and original content releases in other media for worldwide audiences.

EIKON CMS is a campaign management system to manage, localise, distribute and debut feature film trailers and marketing material for feature film marketing campaigns cross cinema, online and broadcast platforms. CMS allows for the worldwide debut of marketing content across all worldwide territories simultaneously on the world clock across platforms such as Facebook, YouTube and other platforms.

EIKON META system manages and facilitates the translation and subtitle delivery of feature film and episodic content in order to provide localised content around the world. It has added functionality of viewing and approval mechanisms for localised graphics and censor edits in order to expedite the entire release of any given content simultaneously.

Recent EIKON work includes the worldwide localisation and mastering for titles “Peter Rabbit”, “Greatest Showman”, “Shape of Water”, “Three Billboards Outside Ebbing, Missouri”, “A Quiet Place”, ‘Red Sparrow”.

YFM’s funds will be used to support the expansion into the US where a new state of the art studio will be built in Burbank, Los Angeles as well as continued investment in the development of technology to enhance the service delivery to customers.

Colin Granger led the investment for YFM and will join the Board at completion.

Colin Granger, Partner at YFM, commented:

We are delighted to be working with Eikon and the management team to support the future expansion into the US and the continued investment in underlying software development. Management have done a fantastic job in growing the business to where it is today and we look forward to supporting them in the next chapter of growth.

Market drivers in the technology enabled media sector continue to be exceptionally strong with increasing levels of content being produced and content producers targeting more global audiences, two trends which we believe Eikon will benefit significantly from.”

Peter Wright, Co-Founder and CEO of Eikon, added:

We are very excited about the future and growing the business alongside YFM. Their history of helping businesses grow to the next level attracted us to them as well as their straightforward approach.”

YFM’s legal advice was provided by Simon Jones of Osborne Clarke, Commercial Due Diligence by Geoff Rampton of RPL and Financial Due Diligence by Rebecca Guerin and Maya Panova of RSM.

Dane Phillips (NOR Capital) and Andy Coghlan and Daniel Jonas (both WK Corporate Finance) acted as financial advisers to Eikon with support from Robert Taylor at 360 Law Services. AIB (John Tobin and Matthew Jennings) provided the senior debt on the transaction.

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Choosing a private equity investor

Steve Harrison
Portfolio Director, YFM Equity Partners

Taking on private equity investment can have a transformational impact on your business, not only in terms of the funding provided but also through the value an investor can add through their input.  PE investors should be experts in business growth and transformation.   They will have experience of what growth strategies work, pitfalls to avoid, they will have networks to call on should you need additional help and as professional purchasers of businesses themselves they are skilled in grooming or developing businesses to make them attractive for sale which will help in ultimately realising value for all shareholders.

However, the decision by any business owner or entrepreneur to bring in an external investor is not to be taken lightly.  The relationship with your new investor will be one of the most important for your business so it is important to choose the right partner.  Obviously, the financial terms of any deal are important, how much funding, the equity stake and on what terms etc.  This is often the key focus at the time of the deal, however there are many more non-financial considerations to bear in mind to ensure you choose the right partner and these are at least if not more important than the detailed financial and legal terms themselves.

Chemistry

You’ll be spending a fair amount of time with your investor over several years.  Can you see yourself developing a successful relationship with the individuals involved?  Do you trust them? Are they straight talking? Do they share your values? Do you know who you will be dealing with post-investment?  Do you think you will enjoy working with them – will it be fun even?

Experience and track record 

An investor usually needs to be able to offer more than just capital.  They will undoubtedly do their due diligence on you and your business, it is important you should do your homework on them.  How long have they been investing?  Is their funding committed and readily available or will they need to raise it which is riskier? Are they able to provide further financial support if needed and do they have the appetite to do this? What is their track record of success and how in particular can they add value to your business over and above the capital they will be providing?  These are all important questions and it is wise to seek references from your investor as part of this process.

Approach

Private equity investors come in many shapes and sizes and all have different approaches to managing their investments.  Some like to take control and will be interventionist, others will be hands-off and distant and many will be somewhere in between.  Some are sector specialists others are generalists. These different approaches all have their benefits and disadvantages.  Be sure to understand your investor’s modus operandi and assess whether it suits your requirements.  Do they share your enthusiasm for your business?  Do they have an office local to you which will make them more accessible?  Will they be engaged, devoting the time you feel appropriate for your business? An important question to consider is how your investor will react to the inevitable set-backs and challenges along the way? Will they be supportive in such circumstances or nervous and overreact?

Objectives

Ensuring you are on the same page as your investor from the outset is crucial and whether they have the necessary flexibility should circumstances change. Do your prospective investor’s objectives align with yours? Do they buy in to and support your plans? Do you share the same objectives in relation to a future sale or exit and are you agreed on the timescales involved?  This latter point is particularly important.  Does the investor back your plan, or is there a risk they will be holding you back or push you to expand more aggressively than you feel comfortable with or looking for the door before you wish to exit?

In summary if you address the above questions and find the right partner then working with a private equity investor can have a transformational effect on your business, providing vital access to capital for investment, and additional skills experience and input to help you and your business grow, prosper, create jobs, access new markets and ultimately enhance value for all stakeholders.

 

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YFM Equity Partners-backed Cloud Data Specialist Matillion Raises $20m

22 March 2018

Existing investor YFM Equity Partners provided additional funds alongside new investors Sapphire Ventures and Scale Ventures Partners to fund an accelerated growth and product development programme

Matillion, the makers of cloud data integration tools Matillion ETL for Amazon Redshift, Matillion ETL for Snowflake and Matillion ETL for Google BigQuery, today announced it has closed a $20 million Series B round of funding led by Sapphire Ventures, existing investor Funds advised and managed by YFM Equity Partners (“YFM”), the specialist UK-based private equity fund manager and new investor Scale Venture Partners. The funding will accelerate the Company’s leadership in the cloud data integration category.

The company, based in Altrincham, (Manchester, UK) and Manhattan (New York, US), was founded by Matthew Scullion in 2011, alongside Chief Technology Officer Ed Thompson and Commercial Director Peter McCord. Matillion has developed leading-edge software focused on allowing its customers to extract, load and transform data into and on cloud-based data warehouses, quickly and at scale.

Having raised Series A funding from YFM in November 2016, in the last 12 months the Company has seen significant commercial traction with annual recurring revenue of growth over 260%. Matillion’s software is used by more than 250 customers across 30 countries, including global corporates, such as GE, Siemens, Citrix and Accenture, as well as high growth, data-centric companies like Vistaprint, Zapier, DocuSign and Upside Travel.

Today’s funding will be used to expand sales, marketing, partnerships and research and development (R&D) to meet increasing demand and further accelerate development of the Matillion ETL product line. The round brings the Company’s total funding to over $26 million. In addition, Angela Warner, Portfolio Director at YFM, Andreas Weiskam, managing director, Sapphire Ventures and Andy Vitus, partner, Scale Ventures Partners, will join the Board of Directors.

Commenting on this new investment round, Angela Warner said: “Matillion has demonstrated outstanding growth in the period since YFM invested. The interest and enthusiasm shown in the fundraising process is testament to the quality of the product, the team and the opportunity to scale globally. This new investment round will enable the Company to invest in and expand the technical team in Altrincham, to support the continued product development and global expansion as companies of all sizes need the tools Matillion provides to swiftly & efficiently manage their data and drive their businesses forward. We look forward to continuing to work with the team and our new investment partners through the next phase of this exciting journey.

In addition we are delighted that this deal represents the third such investment backed by YFM Equity Partners during March, following on from the MBO of Checkmate Fire Solutions Ltd and Ncam Technologies Limited.”

 

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YFM Equity Partners backs MBO of Checkmate Fire

19 March 2018

YFM Equity Partners (“YFM”), the specialist private equity fund manager has backed the MBO of Checkmate Fire Solutions Limited, the UK’s leading passive fire protection provider.

The investment in Checkmate Fire marks the fifth investment from the YFM managed fund, YFM Equity Partners 2016 LP.

Checkmate Fire is the UK’s leading passive fire protection company, providing fully compliant services including survey, design, specification and installation of solutions for fire stopping/air sealing, compartmentation, fire boarding and structural steel protection. Complementing this Checkmate Fire also specialises in fire door surveying, restoration and installation, and provides a fully bespoke range of fire resistant glazing solutions.

Checkmate Fire is one of a small number of fully 3rd party accredited contractors in this fast-growing market and provides a nationwide service from its three UK regional offices. The Company is a founding member of the Building Research Establishment (BRE) and the Loss Prevention Certification Board (LPCB) Passive Fire Installer Scheme.

Checkmate Fire has in recent years delivered significant revenue and profit growth, and the management team led by CEO, Mark Williams and his board colleagues Dave Woffendin and Tomasz Wisniewski, supported by FD Alan Wilson and Chairman Simon Moate, are now looking to invest further in sales and operations to accelerate growth across all areas of the business.

Checkmate Fire’s clients include the UK’s leading facilities management and construction companies, specifiers, building owners, facilities managers and landlords across a variety of sectors, including healthcare, social housing, hospitality, prisons and commercial property.

Ian Waterfield, Investment Director at YFM said: “Checkmate Fire has a strong reputation in this industry and has delivered consistent growth over the last few years.  Its focus on building safety and compliance provides a positive backdrop for the Company to further develop its customer base and expand its geographic reach in the UK.

“This is the fifth investment from YFM’s latest fund, which closed in April 2017 with the aim of investing in well-established UK businesses and supporting management teams in delivering their ambitious growth plans.”

Mark Williams, CEO at Checkmate Fire said: “Checkmate is seeing unprecedented levels of demand for its services.  We are delighted with both YFM’s investment and the expertise the team will provide. We are looking forward to working closely with YFM to enable us to deliver our growth plans and reach the Company’s true potential.”

Checkmate Fire was advised by Alison Palmer of Eaton Smith and Martin Holden of Saffery Champness. Legal advice to YFM was provided by Dahren Naidoo of Freeths LLP, financial due diligence was carried out by Jeff Gardner of DSW Transaction Services and Russ Cahill of Tax Advisory Partnership, commercial due diligence by CIL, and organisational due diligence by Anna Cornwallis of Stratton HR. Santander Growth Capital team, led by Ash Chopra and Dan Houman, provided debt finance and were advised by Georgina Tripp of Gunnercooke.  The exiting shareholder was advised by Gary Black of Freeman Fisher.

 

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YFM Equity Partners invest to support the growth of Augmented Reality specialist Ncam

19 March 2018

Funds advised and managed by YFM Equity Partners (“YFM”), the specialist private equity fund manager have backed an investment into Ncam Technologies Limited, a provider of innovative and leading Augmented Reality solutions for the entertainment industries.

YFM’s investment comes from its two advised VCTs, British Smaller Companies VCT plc and British Smaller Companies VCT2 plc alongside the YFM Equity Partners 2015 Co-Investment LP.

Ncam was founded in 2012 by Nic Hatch (CEO), Sam Boivin (CTO) and Brice Michoud (Senior R&D Engineer) to develop a unique augmented reality solution which combines patented camera tracking hardware that fuses data from multiple sources with proprietary software to adapt the application to its target markets.  The device uses a lightweight sensor bar attached to a camera to track natural features in the environment, allowing the camera to move freely in all locations while generating a continuous stream of extremely precise positional and rotational information that can feed all industry standard graphics engines via Ncam’s powerful and flexible software development kit.

Ncam’s award winning products are utilised globally across Broadcast, Film and Episodic TV production. Customers and users include Fantastic Beasts (Warner Bros), UEFA Champions League (BT Sport), NFC Championship Game (Fox Sports), Game of Thrones Season 8 (HBO), Monday Night Football (ESPN), Super Bowl XLVIII (Fox Sports), Avengers: Age of Ultron (Marvel), Daytona (Fox Sports), and Jupiter Ascending (Warner Bros).  In recent years Ncam has been awarded an Emmy Award for Outstanding Achievement in Engineering Development, Experience & Technology Awards for Best use of Augmented Reality with Ford Motor Company and a Queen’s Award for Innovation for their work in augmented reality for film and television.

YFM’s funds will be used to support the development of new products, invest in the team, and help the business extend its reach into new territories, especially the USA where a new office opening is planned for 2018.

Charlie Robinson and Colin Granger led the Investment for YFM, with Charlie Robinson joining the Board.

Charlie Robinson, Investment Director at YFM, commented: “Nic and his team have done a fantastic job in developing Ncam’s camera tracking technology from a standing start to a leading position in a rapidly developing Augmented Reality marketplace. There are exciting times ahead!”

Colin Granger, Investment Director at YFM, commented: “We are delighted to be working with Ncam to support the future development of their products and their expansion into new global markets, two areas where we at YFM have significant experience of supporting.”

Nic Hatch, Co-Founder and CEO of Ncam, added: “Our vision is to set a precedent of what can be achieved within real-time visual effects. Our relationship with YFM will allow us to expand our technological capabilities’ and keep Ncam at the forefront of augmented reality.”

Craig Deacon, CFO of Ncam, added: “With the support of YFM we can rapidly execute our growth plans, allowing us to develop our market potential and fulfil our global ambitions of becoming a market leader of augmented reality.”

YFM’s legal advice was provided by Chris Reed of Gateley plc, Commercial Due Diligence by Geoff Rampton and Suzy Urch of RPL, Financial Due Diligence carried out by Paul Read of HMT, and organisational due diligence by Anna Cornwallis from Stratton HR. Brian Snelling and Marcus Allchurch from Acuity Advisors LLP acted as lead financial advisers to Ncam with support from Penny Garden and Harry Pearson from Field Seymour Parkes LLP.

 

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Gill Marine acquires Gill North America

5 February 2018

Gill, the leading global brand for technical sailing clothing, announced the British parent company has acquired Gill North America Ltd. The acquisition, for an undisclosed amount, is part of Gill’s ambitious growth strategy, developed since the company was purchased from Nick Gill by YFM Equity Partners in late 2013.

The move is also part of the wider plans designed to strengthen its brand position in the marine apparel market and continue the significant growth seen in 2017.

Gill North America Ltd is the leading marine brand in the United States, Canada, Mexico and the Caribbean, with annual revenues in excess of US$8 million. The deal will see the company’s combined annual turnover increase to more than GBP £20 million, with the US making up 33% of the Gill worldwide portfolio.

Gill North America Ltd previously operated independently under a distribution agreement but will now be an integrated part of the Gill global brand, delivering benefits through expansive markets, new product development, cost synergies, centralized digital platforms, shared operations and customer service.

“Gill grew 15% in 2017 and has ambitions for further growth and to strengthen our position as the leading marine apparel brand around the world,” reports Gill’s CEO Jamie Tunnicliffe. “The acquisition of Gill North America was an important step in this strategy and we are delighted to have finalized a deal which benefits our customers, stakeholders and staff.

“With this brand consolidation, turnover growth will now exceed GBP£20 million in 2018 and we can ensure that we have a consistent brand message and product offering across the world. In conjunction with our partners, Gill now has a global presence with market leading positions in UK, Europe, the US and Australasia.”

David Pritchard, who will continue as Senior Vice President (SVP) of Gill North America, reporting directly to Jamie Tunnicliffe, has guided Gill in North America over the last 30 years, creating the number one brand of choice for sailors, cruisers, anglers and water sports enthusiasts.

“Bringing Gill North America into the global company network will bring enhanced benefits for our US consumers, with extended product lines and an integrated digital platform, and will also safeguard 15 employee positions in the US,” said Pritchard. “We are excited about the future, working together with the Gill brand to continue to grow and better serve those who share our passion for life on and around water.”

Gill manufactures a wide range of clothing and accessories which it exports to over 40 countries and has a prestigious heritage, dating back to 1975 when Nick Gill, who remains a non-executive director, began making technical sailing clothing from his father’s lace factory in Nottingham, UK.

Gill’s product categories include Race, Performance and Active ranges that are well suited for use in a harsh marine environment, inspiring consumers to spend time on, off or near the water.

 

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Regional Investing – the South West & Wales in focus

“You’re a long way from home…..” familiar feedback to Colin Granger, Investment Director at YFM Equity Partners who is responsible for YFM’s investment activity in the South West and Wales.

“The feedback is understandable” notes Granger, “YFM was founded 35 years ago but it’s heritage is undoubtedly in the North East. We have however expanded significantly in those 35 years and are now truly investing across all of the UK”.

YFM has offices in Leeds, London, Birmingham, Sheffield and Manchester and has a partner base of 16 individuals looking to make equity investments of £3-10m to either support ownership changes (such as MBO’s) or growth capital investments through its VCT funds.

“There are over 1,500 companies in the South West and Wales with revenues of £10-50m which is right in our sweet spot at YFM.” The region is close to Granger’s heart having grown up in Gloucester, “The South West has the highest employment rate in the UK and has the highest percentage of highly educated residents. There’s also huge investment coming into the region including Hinkley Point nuclear power station, the electrification of the London to Swansea rail line and even the world’s first tidal lagoon power plant in Swansea!” The culture of the locals is also key to Granger’s desire to grow YFM’s presence in the region, “the people are honest, straightforward and hard working so all of the traits that we at YFM hold dear to our own hearts.”

Private equity activity in the region is also picking up. Between 2012 and 2016, the number of PE deals completed has increased by 18% year and Granger notes that YFM has contributed to this. “We supported the MBO of Indigo Telecom, based in Caldicot, in 2016 and then its bolt on acquisition of Belcom247. We have also provided growth capital to the management team of Friska, based in Bristol to help support their roll-out plans”.

Granger doesn’t plan to stop there though, “we want to invest more in the region and help businesses grow and reach their full potential”.

His fellow partners suspect that Granger’s real interest in the region is his  major passion outside of work, rugby. “I wouldn’t like to comment” says Granger, “but every cloud does have a silver lining…..”


If you would like to discuss any new investment opportunity in the South West or Wales, please contact Colin Granger at colin.granger@yfmep.com.

YFM Equity Partners conducts its investment activities through its wholly owned subsidiary, YFM Private Equity Limited which is authorised and regulated by the Financial Conduct Authority (FRN: 122120).

 

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What’s the Magic Number?

Angela Warner
Portfolio Director, YFM Equity Partners

Entrepreneurs are intuitive and instinctive. Investors like to analyse numbers. That’s just the way they both are. For earlier stage businesses in a rapid growth phase this can be particularly tricky.

So, how do you determine which performance indicators (KPIs) are really key for your business and useful to inform business decisions rather than being no more than data?  Similarly, if you are looking to raise funds, can such KPIs be used to help articulate the story so far and underpin the future strategy when presenting your business to potential external investors? Here at YFM we are constantly evolving these metrics with companies in our growth capital portfolio.

The Evolution of A Business

Consider the evolution of a business from the perspective of new customer traction and recurring income streams.  At the outset it will be difficult to determine any key decisions from data metrics because the low volumes involved and potential early “deals” to attract initial clients will necessarily distort the results.  That doesn’t mean it is not worth tracking the data but more that it should not be relied upon to drive business decisions.  However, as the business develops and more customers come on stream, it will possible to start to assess the “norms” from the data to help direct decisions.  For example, which routes to market are most effective and which marketing gives you best bang for your buck?  Such information should also help to assess what each customer, or type of customer, is actually worth to your business.

What Is The Value Of A Customer & What Does It Cost To Bring Them Onboard?

What is the average customer typically worth (lifetime value “LTV”) & what does it cost to win them (cost of customer acquisition “CAC”)?  It may sound obvious but it only makes sense if the former outweighs the latter!  In the early stages, particularly for SaaS business models, the business may be loss-making with the investment in overhead outstripping revenues from early adopters but the assessment of LTV to CAC will provide comfort that it should become profitable in due course.

Similarly, calculating LTV will highlight customer churn levels.  Are these the same for all customers & products?  Are they an indicator of areas which need addressing as part of the product roadmap?  In assessing the answers it will be necessary to bear in mind the nature of the business itself.  For example, in a SaaS model where customers are expected to be “sticky” you would expect to see very little customer churn.  However, in another software business (perhaps with a different end user purpose) it may be more acceptable / understandable to have higher churn rates.  One size does not fit all and it is important to interpret the numbers in the context of the commercial world in which you operate.

Another interesting measure is “the Magic Number”.  This considers the lead : lag between sales & marketing spend and incremental customer revenues. Put simply, will marketing spend this quarter increase revenues next quarter?

Change in revenue quarter on quarter   =   Magic number
Previous quarter’s marketing spend

You are looking for a magic number > 1.  That is to say, £1 spent this quarter should deliver more than £1 of incremental revenue next quarter.  Again, whether it is quarter on quarter or a longer period will depend on the specifics of your business but the key is having information to give the business the confidence to spend precious funds now in the knowledge of reaping future rewards.

What Else Can Such Measures Provide?

As the business moves to scalable, recurring revenues i.e. normalised trading, deeper analysis beyond the headline numbers should help to assess:  Which spend is most effective – sales overhead or marketing spend? Which cohorts of customers are most valuable?  How many new sales people should be recruited & what should they deliver?  Which aspect of marketing spend is best?  How long does it take to recover CAC (in months)?  Is the answer the same in all geographies?

This insight & information can then provide real value in shaping the marketing, overseas expansion, recruitment and funding strategies moving forwards.

In Summary

Although investors like to work with numbers what they like even more is to work with management teams that not only monitor key performance indicators but truly understand how to both construct and interpret them for their business.  It is not about data.  What is powerful is having numbers which, when assessed in the context of the company and its market, can be used to provide an understanding of market positioning and also help to drive decisions about the future growth and direction of the business.

It’s not magic after all!

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The YFM approach to managing investments

James Savage
Portfolio Director at YFM Equity Partners

My colleague Andy Thomas recently wrote an insightful piece on the myriad funding routes available to entrepreneurs and the key factors to making a successful private equity investment. In the years after that investment has been made, there are many reasons for success but two stand out – a partnership approach and structural evolution.

Partnership approach

A good private equity investor will look to partner with the management teams they have backed.  They will put in place the building blocks for growth but recognise that management teams and investors bring different, complementary skills and experience. Management teams bring   entrepreneurial zeal, deep knowledge of their market, operational excellence and strategic vision.  Good investors bring a wealth of experience of supporting small fast-growing businesses, the issues they will face and the ways they can create value, as well as an extensive network of experts who can support the executive team as they grow.

The above combination can be a powerful one for growth but needs to be underpinned by alignment, both economic and strategic. Equity participation brings economic alignment and it is crucial to take time getting this right – to recognise who is creating value in the business today and who will do so in the future. Getting this right (or wrong) can make a significant difference to motivations and to the ultimate outcome. Strategic alignment comes through taking the time to understand management’s wider growth ambitions for the business and their personal aspirations and then making sure these match the aims, ambition and timescales of the investors.

Structural evolution

At YFM we have funds which cover both growth and buy-out capital, so the businesses we invest in will naturally be of different shapes, sizes and stages of their journey. Quite often we back a management team with great ideas and skills but who haven’t had the time, resources or the need to build out a wider operational, financial and governance framework that the business will require as it grows. An important part of the value we can add is through helping the management team to put this framework in place so that the business is not held back by having outgrown its way of working.

For a business to evolve it needs to take that step forward – to look at itself and where it wants to be in say five years’ time. We have built a network of non-executives who have “been there, done that”, bringing extensive sector knowledge and, crucially, experience of scaling up and selling businesses and of working with new investors.  They can help advise teams how to build the right teams and decision-making processes to keep one step ahead of the growth of the business.

One of the most important areas for this structural evolution is the finance function which in smaller businesses can often be seen as administrative but which we see as crucial to the value creation strategies of the business. There are no hard and fast rules on the optimal set-up but when it works well, finance permeates every level of the business, capturing performance and articulating it via a clear set of KPIs and providing timely and accurate information, but more importantly informing board level debate and ensuring implementation of its strategic decisions.

What does success look like in practice?

Our investment in Waterfall Services is a good example. We first invested in 2007 and then supported two acquisitions prior to our exit in 2014.

There was plenty of scope for misalignment amongst the shareholder base with three institutional investors, a group of private shareholders and management. And along the way we had to overcome the sad passing of an important team member and the appointment of a new Finance Director, who became a key member of the senior team.

This mix of stakeholders, coupled with the inherent conflicts of interest of the ultimate exit path (a secondary buy-out) meant the potential for misalignment was ripe. However, the strong relationship built up over the preceding years meant we collectively had the ability to navigate this complexity resulting in a successful exit for the institutions (a 5x return) and some director shareholders, while other directors achieved their aspirations of remaining with the business alongside a new investor.

Conclusion

Completion of an investment is the first step on an exciting journey. Thereafter the factors to create value are multiple – but we’ve found that if you stay focused on alignment between investors and management, and ensure the management team put in place the right skills and processes to manage the business as it grows, then you’re heading in the right direction.

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