Poundland: Advent sees the pounds roll in

The deal is thought to be worth around £200m, and represents a significant exit by Advent, which has owned the firm since 2002.

Over the past eight years, Advent has supported the management's ambitious growth strategy. Since 2002 the retailer has opened almost 200 stores, bringing its total to over 260. The West Midlands-based firm employs over 7,000 staff and has created 4,000 jobs since Advent's initial investment.

Poundland's simple premise of selling thousands of items - varying from cleaning products to chocolate bars and garden gnomes - for just £1 has gone down well with British consumers, particularly during the recession.

With such rapid growth and a recovering economy, it might seem Poundland's prospects for further growth are limited, but both Warburg Pincus and Advent believe the retailer has a bright future ahead of it.

The UK's discount retail market is estimated to be worth £24bn annually, according to Advent, and its low price point means it is more resilient than many other retail sectors. With widespread public-sector spending cuts expected after the General Election, Poundland could benefit further as cash-strapped consumers seek to save on everyday items.

Large and small rivals to Poundland have thrived around the country, including 99p Stores, which has already opened 54 stores this year. Warburg Pincus will hope the strong brand recognition and presence on many UK high streets will help Poundland stay ahead in this highly competitive market.

Henry Wells, managing director of Close Brothers Corporate Finance, who advised Advent on the deal, says: "Poundland has performed exceptionally well over the last 12 months and is well positioned to perform even better during the recovery as consumers continue to search for best value products and Poundland capitalises on its position as a market leader in the discounted goods sector."

Advent is no stranger to the budget retail sector, having previously invested in US-based Dollar Express and France's Stockomani. The firm was also thought to be involved in a potential buyout of Matalan, another UK discount retailer, but reportedly walked away from the high, £1.5bn price-tag.

While other private equity investors have been looking to top-end luxury retailers, Advent is making tidy returns focusing on the more basic needs of everyday consumers.

Warburg Pincus plans to support chief executive Jim McCarthy's continued growth plans. With Poundland's revenues set to hit £700m in 2011, they too could see the pounds start rolling in.

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• Topics
• Buyouts
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• UK / Ireland
• Close Brothers
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