In Profile: Endless

Few UK private equity firms can claim to have been as active as Endless in the past 18 months. From a successful fundraising to a raft of new deals and a handful of exits, the Leeds-based buyout house has been firing on all cylinders, continuing the steady growth it has experienced since inception in 2005.

Dealflow had initially been fairly sedate for Endless in the immediate post-crisis years, with unquote" data recording three transactions in 2009 and as many in the following three years. After a similar 2013 dealflow-wise, a switch was promptly flicked in the middle of 2014: Endless completed no less than four incoming transactions in the second half of that year and sustained that investment drive in 2015. Overall, the firm has completed 12 buyout investments over the past 18 months according to unquote" data, narrowly missing out on the top spot of the UK buyout league table to the traditionally hyperactive LDC.

The fund: bigger things to come
It is no surprise that the uptick in deployment coincided with the GP's latest fundraising effort: the Endless IV fund closed on £525m at the end of December 2014, after only two months on the road. The new fund was significantly larger than its predecessor, which, according to unquote" data, closed on £220m in July 2011.

The fund received commitments from a diverse LP base comprising funds-of-funds, university endowments, family offices and foundations. Investors hailed from Europe, the US and China, with Access Capital Partners, Alpinvest Partners, The Northern Trust, Bregal Investments and Cambridge University Endowment Fund being among the prominent LPs in the fund.

The Endless team represents the largest single investor in fund IV, with a GP contribution in the region of 6.5%

But perhaps the biggest surprise in the vehicle's LP base has to do with Endless's willingness to bet on itself: the Endless team represents the largest single investor in the fund, with a GP contribution in the region of £34m (roughly 6.5% of overall commitments).

Speaking to unquote" at the time of the fund close, partner Darren Forshaw said the new fund would broadly stick to Endless's typical deal sizes, targeting companies that generate turnover of between £100-500m, but added that the GP would now have the option to write tickets of up to £80m.

This move towards larger equity tickets was in fact already underway following the close of the Endless III fund in 2011. The £220m raised then marked a 33% increase on Endless's previous fund, which closed on £164m in 2008. This larger pot led to the investment range being extended from £1-25m to £1-44m, which enabled Endless to address larger investment opportunities. The vehicle has so far exited three of its assets, with a 3x return for investors as of November 2015.

But at the same time, Endless remains exposed to the lower end of the market via its Enact vehicle. The fund was launched at the end of 2013 with a £10m target and structured to take advantage of the Enterprise Investment Scheme (EIS). Enact was specifically set up in reaction to the continued lack of funding available from traditional sources such as banks and typical private equity firms for smaller businesses. The fund targets small to medium-sized companies, specifically with 250 employees or less, in need of liquidity, or facing strategic or operational issues. It was initially set up to invest up to £2m of equity in each deal – this was later pushed up to £5m.

Click here for a complete overview of Endless's funds under management

 

The investments: larger deals, shorter holding periods
The deals inked by Endless in 2015 highlight both the firm's swelling investment range and its willingness to diversify its strategy away from pure turnaround situations, instead aiming to become the go-to sponsor for complex transactions with a strong operational angle.

In April, Endless backed the £60m management buyout of Adare Group, a UK-based marketing and secure communications business. The GP came on board to help the business undertake a global expansion strategy, which will include bolt-on acquisitions. The company will also seek to increase its headcount and invest in new technology and infrastructure. Adare was previously owned by Bank of Scotland, which acquired the business in a £119.5m buyout in March 2006, and has a combined turnover of £170m.

In May, the GP backed the management buyout of High Street TV, a UK retailer and TV shopping channel, again to back an acquisitive international expansion programme. The value of the deal was undisclosed, although rumours of a £75m price tag were floating around the market when the business went up for sale. Founded in 2008, High Street TV anticipates a turnover of £70m in 2015 and EBITDA of £10m.

Endless further bolstered its non-core carve-out credentials in October, buying the UK and Irish businesses of insolvent Dutch technical services provider Royal Imtech. Endless backed the two divisions' management buyout, which will see them operate as an independent entity. While Royal Imtech declared bankruptcy at the beginning of August 2015, the GP stated the UK and Ireland businesses were profitable and well-run, despite being affected by the parent's woes, which in turn were attributed to difficulties with the German operations.

The Endless III vehicle has so far exited three of its assets, with a 3x return for investors as of November 2015

On the exit side, short holding periods were on the menu for the assets divested by Endless last year. In November, the firm sold interior fittings business Gradus to Gerflor, a flooring company owned by ICG since 2011. Endless stated it had reaped a 65% IRR on the investment over a little more than a year – the firm backed the management buyout of Gradus from Caird Capital in September 2014.

In August, Endless divested another of its Fund III investments after an even shorter holding period. The firm sold incident management service FMG to listed trade buyer Redde in a deal worth £43.2m, just four months after backing the company's MBO, which was reportedly valued at around £40m. Endless stated the deal delivered strong returns, despite coming so shortly after its initial investment and the small differential in enterprise value.

Click here for full details on Endless's current and realised portfolio

The team: broadening the partnership

With the fundraise of Endless IV in the bag and an accelerated deployment rate, the firm also made significant changes to the team in 2015. In May, Chris Clegg, James Woolley, Matthew Deering and Aidan Robson joined co-founders Garry Wilson and Darren Forshaw as partners.

As managing director for Endless's Leeds office, Clegg now oversees the GP's activity across Yorkshire and the north-east. Woolley, who is also based in Leeds, joined Endless in 2007 and has since managed the buyout firm's investments as portfolio director. Deering has a 15-year track record in corporate restructuring and corporate finance and has worked with the firm since its inception, leading the Manchester office prior to his promotion. Another of Endless's founding members, Robson works in the GP's London office.

The partnership was further extended towards the end of last year, with Francesco Santinon being promoted in the London office. Santinon joined Endless in 2012 and was previously a director in the firm's London office. At the time of the appointment, Endless partner and co-founder Garry Wilson stated the aim was to eventually bring Santinon into the partnership, which now tallies seven professionals as opposed to two just a year ago.

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