Marwyn has floated 13 cash shells on AIM since 2006. So you might expect Corsellis to extol the virtues of the purpose-built vehicles, which attempt to provide selected private companies with a short cut to a public quotation.
Confounding such expectations, he says, ‘Generally, cash shells are one of the least successful routes for companies to list on the market. If you can’t get on the market normally, then you might wonder why you want to be there.’
But Marwyn’s shells are a bit different from the run-of-the-mill variety. For one thing, the executives who will run the company are recruited first, and tasked with seeking suitable acquisitions in a chosen sector. ‘It’s akin to finding a striker before you have bought the club,’ quips Corsellis.
They also have impressive resources behind them, both human and financial. Deals are sourced with the help of Marwyn’s 20-strong research team, and the firm has invested more than £1 billion of equity into various vehicles since 2006. That includes both the cash that goes into its “clean” (purpose-built) shells and the far greater sum raised for various “feeder” funds, closed-ended vehicles that inject capital into Marwyn’s AIM-listed companies when they need it to do deals.
It’s a slightly unusual approach, but Marwyn’s partners believe that conducting a buy-and-build strategy through a publicly listed company has big advantages over the private equity model. Corsellis explains, ‘It gives the management team more autonomy, because it’s their company; it allows you to issue shares when you buy businesses, and for the banks it’s a lot more attractive because they can take equity that they can hold and value.’
Another attraction compared with private equity is the lower cost of capital, claims Corsellis. Private equity funds have a limited life, so if a firm puts £50 million of capital into a buy-and-build proposition three years before the intended exit, it must triple that money in three years to get its desired cash-on-cash return. Marwyn’s approach, on the other hand, allows more flexibility in how value can be generated and extracted.
That doesn’t mean the exit isn’t important, and Marwyn aims to hold its investments for two to four years. One of its portfolio companies, vocational training provider Melorio, recently received a bid from Financial Times publisher Pearson that valued it at approximately £120 million. That would more than double Marwyn’s original investment in the company, which it floated on AIM almost three years ago.
‘We believe that you should exit only when you can take everyone else with you,’ says Corsellis. ‘We never sell our position ahead of the management [team] and other investors.’