“Important decade for private equity” as LDC commits to back more SME firms

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 40^th 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 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.

Dale Alderson, Head of North West at LDC, added: “We know how challenging 2020 has been for businesses up and down the country, but we’ve also seen first-hand how key ambition has been to building resilience and scale during uncertain times.

“The North West is home to some of the UK’s most exciting and driven business leaders, and as an investment partner we remain committed to helping them seize new opportunities for growth and expansion. We look forward to continuing to champion the ambitions of management teams across the region in what is set to be another unprecedented year.”

Of the companies LDC sold in 2020, the average hold period was 4.4 years, whilst management teams achieved an average sales growth of 203 per cent and profit (EBITDA) growth of 246 per cent during their partnership with LDC.

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.