The best way to achieve growth is through private equity involvement, believes Alex Cooper-Evans, investment partner at Electra Partners, the mid-market private equity fund manager.

‘It’s hard to see any consistency in bank appetite for lending at the moment. Another option might be angel finance or some other form of venture capital – which is probably a good idea up to a certain stage, but beyond a particular size of business, especially ones addressing the global market, you need to think about a different type of capital.’

Rhian Davies, partner at Electra Partners, says that the flexibility of private equity involvement is one of its biggest advantages, as opposed to taking the IPO route.

‘If you take the IPO route you are talking to a lot of shareholders, you’re in the public eye and there’s a lot of pressure to make sure the earnings momentum is maintained. You are trying to satisfy long-term investors by making a number of short-term decisions.’

Electra Partners is the manager of Electra Private Equity, a private equity investment trust listed on the LSE with £300 million of capital to invest over the next few years, which targets businesses across all sectors.

Flexible Finance

Cooper-Evans says that the flexible capital a listed private equity firm such as Electra can provide sets it apart from the traditional “Limited Partnership” model of many private equity firms.

‘With most private equity firms the involvement time is limited. After the five-year investment period the fund investors want their money back, but we don’t have that pressure.’

One of Electra’s key differentiators is the ability to hold investments in portfolio companies for longer than the traditional five-to-seven-year investment period, supporting management teams through more than one phase of growth.

Specialist safety equipment business Capital Safety was the subject of a £98 million buy-out by Electra in 1998. Since then, the business has been transformed from having a regional focus into an international brand.

It was only in 2007 when the management team at Capital Safety wanted to make a sizeable acquisition that Electra Partners decided it was the right time to exit the investment. It has since reinvested in the company and is one of Electra’s largest holdings today.

Cooper-Evans comments: ‘The Capital Safety deal is a good example of where the business strategy drove the investor exit strategy, rather than the other way round.’

Meanwhile, Allflex, an animal identification product business, is Electra Partners’ largest investment, having been acquired in 1998 as part of a £28 million deal.

Davies explains: ‘Allflex did have a presence in a number of markets but the first thing we enabled the business to address was the development in technology towards electronic animal tagging.’

This drive towards innovation enabled Allflex to grow from a regional business into a global market leader with products distributed in 80 different countries.

Building on Experience

As for what private equity brings to the table, Davies suggests that the greatest benefit is the expertise and experience from previous investments. She says that Electra Partners frequently leverages the knowledge of fellow portfolio companies so that investee businesses have a sounding board for advice.

This company interaction can be pivotal in ensuring the regional to global shift, says Cooper-Evans. For example, in helping Capital Safety buy a new electronic tag from Allflex for its safety equipment, it was able to offer a unique product to its customers where they could manage and track their stock and comply with legislation more effectively.

‘This is a classic example of being able to leverage know-how between two investee companies’ he says.

‘Whilst there are a number of options for financing growth, choosing a long-term partner in private equity, whose interests are aligned with that of management, is, in our view, an excellent way of accessing the expertise and capital needed to transform a regional business.’

Rhian Davies
Partner, Electra Partners
Tel: 020 7214 4200
Email: rdavies@electrapartners.com

Alex Cooper-Evans
Investment Partner, Electra Partners
Tel: 020 7214 4200
Email: acooperevans@electrapartners.com