Name that firm: three exits in three months

And it generated returns that would make a riskier PE house salivate, despite taking on less risk: its last three deals saw IRRs of 28%, 41% and 28% respectively.

This little-known outfit is fast becoming a force to be reckoned with: in addition to these three recent exits, it is aiming to announce another new deal in days.

It was born as Investec's mezzanine arm in 2003, and, like all good intermediate capital providers, quickly morphed into a more flexible beast. Its most impressive flexes were those of providing ‘preferred equity' in deals such as Superglass Insulation and DVC back in its early days; and more recently, with Coffee Nation and James Villa Holidays.

Superglass saw the outfit support the 2005 NBGI-led buyout of the firm in a £40m deal. Just two years later, it was sold, generating a 140% IRR for Investec across its mezzanine and preferred equity. Even more impressive is the impact the preferred equity had on the sponsor: NBGI's cash multiple was increased from 8.7x to 10.7x, thereby vindicating NBGI's decision to seek an alternative to traditional syndication.

Despite its success with preferred equity, Investec GAF isn't a one-trick pony. The team achieved 5x money on its sale of Big Bear earlier this year, a branded cereals to confectionery group it built up (without a preferred equity slice) and sold to Finland's Raisio.

Stealing tricks?
Of course, working with the UK's lower mid-market for eight years will have taught the team a trick or two. At the end of last year, Investec GAF formally announced its ability to provide senior cash-flow lending alongside their existing asset-based lending, and intermediate capital offering.

When asked why the firm announced these as part of its remit, despite having dabbled around for years, Investec GAF's James Stirling responds: "Previously we provided senior to the extent it unlocked a mezzanine role for us. We took the decision last year that we would now offer senior debt as a stand-alone if required. We now have the ability to look at deals from a number of different angles."

Stirling explains that since the announcement they have been approached by many GPs who express dissatisfaction with existing lenders. "We're now working with a whole raft of tier-one houses now that we haven't before, but this does not mean we are turning our back on our core business. This is no different to our decision in 2007 to introduce an asset-based lending capability. We very much see this as being value-enhancing for the wider GAF business and our clients. Now, with the different business lines, we can look at any asset and assess different ways of cutting the cake. The discussion doesn't necessarily just need to start from "EBITDA less maintenance capex times three"."

This begs the obvious question: is Investec GAF treading dangerously in the footsteps of Bank of Scotland, which was the darling of UK mid-market LBOs 15 years ago before launching its own private equity unit in 2001 and turning its erstwhile co-investors into competitors?

"No," Stirling insists. "We are good bankers, not equity providers. Since we established our business, an assessment on the sponsor has been a key area of our diligence. Anyone can get their heads around a business plan (even us) - we recognise that to actually drive the delivery of that plan requires a different skill-set. That's the value a good sponsor brings to the table."

Today the Investec GAF team stands at 12 people, with another two due to join before the summer. Since its inception in 2003, the team has participated in 30 deals.

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• Exits
• UK / Ireland
• Investec