Private equity offers a combination of investment and support that can help with several different growth strategies, including international expansion, new product launches, acquisitions, improving operational efficiency or recruiting new talent.
“Most importantly, it allows business leaders to grow their business, their way,” says John Garner, managing partner at LDC, the private equity arm of Lloyds Banking Group.
Grow your business, your way
“Sometimes, you will have a crystal-clear idea of where you want to go next in your growth journey,” adds Garner, “but you might need investment or a sanity check from someone who has relevant experience, to make it a reality. There may be other times when growth options could take a number of directions. In both cases, a private equity investor can be invaluable, working with your team to understand your priorities, and pin down the best strategy.”
If a business is already growing, private equity can help speed up growth without the management team losing control or disrupting the company culture. “The backing of an investment partner means you can be sure you’re being supported over the long-term, so growth is sustainable, no matter what the economic climate,” says Garner.
Organic growth opportunities include everything from moving to new premises, expanding sales into new sectors, developing new products and rolling out new services, to recruiting additional staff and investing in training opportunities.
LDC partnered with SRL Traffic Systems, a provider of equipment-as-a-service solutions such as traffic and pedestrian lights. The private equity firm invested £24m to assist CEO Richard Tredwin in a management buyout. In just two years, SRL increased its fleet from 7,500 to almost 13,000 systems, added four new depots to its network and opened a new innovation and technical centre of excellence, all of which helped to double revenues to £37m.
“It’s all about preparation,” says Tredwin. “Your plan needs to instil confidence in a potential investor. Be honest about where you are and what’s needed. Think about what makes your business attractive – for us, we knew SRL was a fantastic business with strong cash and profit drivers, predictable growth and a respected and invested leadership team.”
The support of a private equity partner can add value in other ways, too. Many have operational experts who can work alongside management teams to achieve long-term success, from helping to identify pressure points, or growth opportunities in areas such as IT, sales and marketing.
Identifying acquisition targets
Working with a private equity partner can also help you to acquire close competitors and complementary businesses to strengthen your offering. In the industry, they’re referred to as ‘buy-and-build programmes’. Private equity houses will offer access to specialist M&A expertise to help identify businesses with a strong fit, ensuring the purchase and integration process runs seamlessly.
“We know that, as a management team, you know your business better than anyone, and you’ll likely have a good idea of potential acquisition targets,” says Garner.
Over a three-year partnership, LDC supported Fishawack Health, a global healthcare communications agency, to triple its annual revenues over three years following an ambitious acquisition strategy in North America, welcoming five new businesses in total. On exit, Fishawack had 14 offices across both Europe and the UK, and more than 850 employees.
The combination of funding and tailored expertise from a private equity partner can also help businesses expand internationally through acquiring a business abroad, building new relationships, or establishing a new offer overseas.
The founder and CEO of Texthelp, Martin McKay, partnered with LDC to help accelerate growth across the UK and internationally. In just 18 months, Texthelp had enhanced its market leading position by expanding its footprint across North America and grown to employ 250 people across offices in Northern Ireland, the US, Canada and Australia.
“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. They weren’t buying stocks and shares; they were backing the management team and our plans. They were there to help us make the boat go faster,” adds McKay.
A stepping stone to IPO
Many business owners have dreams of listing their company on a leading stock exchange. An Initial Public Offering (IPO) can be a great way for a company to unlock significant growth, building attractiveness to investors, and providing an additional layer of transparency in any business dealings.
“But it is also a huge step, and it’s important that you prepare as best you can,” says Garner. “Private equity can act as a stepping stone to get there – or an alternative route to growth in times of economic uncertainty. Investors will work closely with your management team to help build value and consolidate your offering in the run-up to listing, and ensure you are ready to take the next step.”
LDC backed indie games developer Team17, and its founder Debbie Bestwick. Over the following two years international sales rose by 40% and both revenues and EBITDA grew by more than 100%. When Team17 announced an IPO on the London Stock Exchange, its opening value reached £217m, raising proceeds of £107.5m.
There are a wide range of avenues to grow your business. Partnering with a private equity investor can not only help you make the right decision, but make that dream a reality.
Explore our ‘My Ambition’ series to understand how a private equity partnership has helped some of the UK’s most exceptional business leaders to deliver on their ambitious growth plans.
For any management team interested in finding out more about a private equity partnership, LDC, the UK’s leading mid-market private equity firm, is here to help. Find out more.
Image credit: yalcinsonat1 via Getty Images