In Profile: LDC

According to research from the unquote" proprietary database, LDC has completed 27% more buyouts and expansion deals within the UK than any other player over the past 10 years. Furthermore, within the £25-500m deal valuation range, the GP outstripped its closest competitor Electra Partners in terms of total number of deals by some 185%. With 11 deals already completed at the time of writing, H1 2016 has been LDC's most active period since H2 2013.

As was the case for many GPs, LDC's activity picked up after the initial slowdown caused by the financial crisis, averaging 23 deals per year between 2011-2013 compared to 13 in the preceding four years, according to unquote" data. Yet in 2015, the firm adopted a slightly different strategy, completing fewer but larger deals. According to LDC, it deployed £350m in 2015, equivalent to around £25m per deal. By comparison, the average equity investments made by the GP in 2013 and 2014 were £18.8m and £15.6m respectively.

The swelling ticket size is reflective of a general increase in pricing multiples in the UK, with aggregate deal value for all PE- and VC-backed transactions soaring from £23.4bn to £29.2bn between 2014-2015, despite a 23% decrease in the total number of deals completed.

The regional approach
Given its UK remit and the sheer volume of deals it completes, LDC operates through a number of regional offices throughout the country. The firm has seven offices across England, two in Scotland and one in Wales, with its Cardiff base the latest to open in May 2016.

The GP's chief executive, Martin Draper, highlights the benefits of being "part of the business communities" in which it invests. Indeed, LDC hired Dewi Hughes, who had previously led Deloitte's Cardiff-based corporate advisory division, to head up its new office and ensure the team is able to hit the ground running. Draper cites an increase in both the rate and scale of deal activity within Wales as a key motivation behind the Cardiff office. However, to date the GP has only completed a handful of investments in Wales, most recently acquiring media production company Boom Pictures in July 2012 – though portfolio company Inprova also bolted on Caerphilly-based UES Energy in 2015.

In the past five years, Greater London has been among the busiest region in terms of activity for LDC. However, with just four transactions, 2015 represented a second consecutive annual decline in dealflow for assets based in the capital.

The firm's London office suffered a blow in June 2014 when its head, Daniel Sasaki, left to launch Mayfair Equity Partners. Mayfair subsequently hired a host of LDC's London-based investment directors including Waqqas Ahmad, Bertie Aykroyd, Kunal Dasgupta and Maria Carradice. However, LDC responded by handing responsibility for operations in the capital to co-head and CEO Chris Hurley and has since hired investment directors Steve Phillips from LGV Capital, James Morris from Grant Thornton and Christian Bruning from its Reading team.

 

Despite the slight tail-off in activity for the London office over the past two years, Hurley points out that the GP intends to deploy up to £450m in the city's businesses over the next three years. He says: "In recent months, the office has completed some of LDC's stand-out transactions, including online travel agent Iglu, alternative assets information group PEI Media Group and global ID cards business Magicard."

Looking at more recent activity and excluding London, the north of England remains the area where LDC completes most of its deals, according to unquote" data. Indeed, in 2015 the firm made five investments in the north, surpassing the four investments made in the London region, while the combined deal value of £351m represented 38% of the GP's aggregate deal value for the year.

Investments and exits
Despite the declining dealflow over the past two calendar years, the GP has lived up to its hyperactive reputation in 2016, with April and May proving to be extremely busy months. This is of particular note given the recent slowdown in dealflow within the UK, largely attributed to the upcoming EU referendum.

The firm impressively completed seven deals throughout the two-month period. The flurry began with the acquisition of a significant minority stake in Northampton-based courier company Panther Logistics, as part of a £17m management buyout. Santander's Midlands-based structured finance team provided a senior debt package to support the deal. Shortly afterwards – also in April – LDC supported the management buyout of cycling accessories company Zyro and invested £8m of growth capital in health food retailer Vital Ingredient.

The following month, the GP increased its activity further, announcing four deals within the space of one week. First the firm backed the management buyouts of HR software company CIPHR People and cloud-based IT and communications service Giacom World Networks. Shortly afterwards, it took a significant majority stake as part of a £22m MBO for identification card business Magicard and a minority stake in the buyout of building envelope manufacturer CMS Window Systems.

Of particular note across the investments LDC made throughout the two-month period is a lack of focus on international expansion as a growth strategy. Of the seven companies, only Magicard cited this as a key element of its immediate future plans. While this is unusual for private-equity-backed businesses in the lower mid-market, this less restrictive focus perhaps gives an indication as to why LDC remains active, while competitors have been less assertive.

The GP has also been extremely active on the exit front since the start of April. At the time of writing, it had made eight exits, notably netting a 6.1x multiple and 80% IRR following the sale of pub chain NWTC to Graphite, a 4x return on the trade sale of Property Software Holdings, a 2.4x return on the listing of Joules, and 2.3x on the trade sales of Orion Media, Original Additions and Synexus. The £178m sale of Synexus to US pharmaceutical company PPD was specifically noteworthy, having been under its tenure for just one year. In total, the firm says it has generated proceeds of around £1.3bn over the past two years.

In addition to the aforementioned Synexus exit, notable transactions include the sale of price comparison website uSwitch to Zoopla Property Group in April 2015 in a deal worth up to £160m and the £154.4m listing of tonic water and mixers brand Fever-Tree in November 2014. The flotation of Fever-Tree saw the selling shareholders – LDC and certain members of management – raise £89.3m, with the GP retaining a 10.4% shareholding. The firm fully exited the business in July 2015.

Though it has a generalist remit, the firm's track record since the beginning of 2011 shows a particular attraction to companies in the industrial goods and services sector. With a total of 36 transactions, such deals account for 34% of its total dealflow, according to unquote" data. Of these, the highest profile has been the £175m secondary buyout of courier business CitySprint from previous backer Dunedin. Technology, travel & leisure and media are also areas LDC invests in heavily, account for 21%, 10% and 9% of past transactions respectively.

 

The team

Chris Hurley
With responsibility for operations in London and Reading, Hurley is co-head and chief executive of LDC. He was appointed to lead the firm alongside Martin Draper in April 2014, when their predecessor Darryl Eales stepped down as part of a predetermined succession plan. Hurley joined the GP in March 2004, and is responsible for sourcing and securing deals with equity valuations of up to £100m. He oversees the GP's investments in online travel agent Iglu, macroeconomic research company Capital Economics and recruitment services provider Pertemps Network Group.

Martin Draper
Draper oversees LDC's operations in Aberdeen, Bristol, Birmingham, Manchester, Nottingham and Leeds. He joined the firm from Bridgepoint in 2002 and was responsible for investments including firefighting equipment manufacturer Angus Fire, rural holiday accommodation specialist Forest Holidays, IT and communications services provider Node4 and Birmingham's National Exhibition Centre Group. As with Hurley, Draper sources and delivers transactions consisting of up to £100m in equity.

Yann Souillard
Souillard is managing director for LDC South, having originally joined the GP in 2004. Prior to joining LDC, he spent six years at Barclays and was head of mezzanine finance when he left the bank. He currently has a seat on the board at portfolio companies Microlease, Clifford Thames, EDM and Equiom.

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