Elysian takes stock after fifth deal in three months

Harriet Matthews
22 September 2021

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Following a busy three months that has seen Elysian Capital announce five platform deals from its latest fund, CEO Ken Terry speaks to Unquote about the firm's recent activity, its deal pipeline and the UK's buoyant lower-mid-market.

Elysian Capital has announced the fifth deal from Elysian Capital III, acquiring impact protection products producer D30. Elysian III made its first investment in July 2021, acquiring executive search and management consultancy Eton Bridge Partners. In August, the GP acquired Cross Rental Services (CRS) in an SBO from Lonsdale Capital Partners. The acquisition of marketing agency Gravity Global followed at the start of September.

Alongside the acquisition of CRS, the GP announced the opening of the firm's Dublin office, with former Elysian partner Laura McCoy returning to the firm to head the firm's operations there. The new office will allow the GP to seek opportunities in Ireland, generally involving businesses than can operate across both Ireland and the UK.

Elysian III is now around 40% deployed and is on track for Elysian's deployment plans since its final close, CEO Ken Terry tells Unquote: "We came second in processes a number of times in late 2020 and early 2021, and prices seemed very hot. But suddenly the deals came along like buses; we have now managed to close five deals since July, plus one add-on and another to come in the next few weeks."

Earlier in September, the GP made its first bolt-on for the portfolio of its third fund, acquiring Deeside Cereals as an add-on for Wholebake, a seed and fruit bar manufacturer that Elysian had acquired in August from Bridges Capital Management.

"We generally tend to complete two to three deals per year, but this period has been exceptional – there has been a real rebound since the start of the year," Terry says. "Our team has been working flat out going around the country seeing companies; we have been back in the office three to four days per week since the start of the year, and it has paid off."

Elysian III held a final close in October 2020 on GBP 325m, surpassing its GBP 300m target. The vehicle deploys equity tickets of GBP 20m-40m, backing UK-based mid-market companies with enterprise values of GBP 10m-100m. The fund expects to make 10-12 platform deals in total.

Evaluating opportunities
The GP expects to take some breathing space after its flurry of deal-doing, Terry says. "We are always open to attractive opportunities, but now is the time for us to digest what we have acquired and take stock. We are not rushing to keep deploying unless there is a really good opportunity."

Elysian invests on a sector-agnostic basis and does not set specific criteria in how it sources its deals. "In every situation, we are looking for somewhere we can add value, be it an SBO, completely off market, or straight from a corporate," says Terry. "We have in-house operating partners, which goes down well with many management teams and businesses, since it allows us to be a hands-on, value-added group to help management build a better business."

I have always been on the optimistic side that Brexit was a non-issue for the lower-mid-market in the UK and I think that I have been proved right" – Ken Terry, Elysian Capital

Elysian's recent deals have been completed against a backdrop of significant activity in the lower-mid-market. "The big push in completing deals due to the potential tax changes did not really stop – people were still committed to processes and many sellers seem to have reassessed their lives and their businesses due to the pandemic," Terry tells Unquote. "It's a buoyant market and it has been a successful second quarter and third quarter. We had lots of discussions about Covid and Brexit when we were fundraising; I have always been on the optimistic side that Brexit was a non-issue for the lower-mid-market in the UK and I think that I have been proved right."

Although the market is busy and there is no shortage of opportunity, Elysian does not expect to deviate from its usual fundraising cycle. "It's not our strategy to shorten the cycle – we are interested in overall returns for the fund, not increasing assets under management," says Terry. "Almost 10% of all the money we invest is from the people who work in our firm, so our strategy remains to maximise returns over three to four years."

Amid its fundraising and fund deployment, the GP is also looking to make exits. "There have been a couple of exits that have been delayed by around 18 months, due to the pandemic, but we have one or two that we might see early next year," Terry tells Unquote. "Some people have used this period to empty their portfolios, but we made returns of 4.7x on the exit of Pebble Group last year, so we are not in a rush."