LDC bumps up "growth agenda", renews focus on consumer

The plan comes on the back of what was a "standout market" in 2021, where LDC saw strong competition for deals, managing partner John Garner said.

"Historically, we've deployed GBP 350m a year on investments," he said. "We have a growth agenda to move on from that level."

Over the past year, the Lloyds-backed sponsor invested GBP 400m across 19 new platform companies alongside 65 bolt-on acquisitions, he said, adding that technology companies were a big part of its new investments.

As a generalist investor, the sponsor has had experience investing in technology, healthcare, industrials and consumer. It will make a renewed focus on consumer businesses now that the sector is beginning to recover after the difficult trading conditions due to the pandemic, Garner said.

Consumer-facing businesses could be set to benefit from the economic environment thanks to the pent-up savings made during the pandemic, as well as a shift away from the use of lockdowns by the UK government to deal with the health crisis, he said.

Over the last few months, LDC made investments in pop-up mall Boxpark, fine foods manufacturer Bramble, UK-based equestrian brand LeMieux, and games developer Marmalade.

Although LDC could make tweaks to its sector focus, Garner stresses that it assesses opportunities based on the management and their business plans rather than taking a sector-based approach to investment.

In preparing for the new wave of investments, the sponsor made 20 new recruitments across the UK last year. Many of the new hires were in investments, and it will continue its recruitment drive across all its offices in the UK, he said.

Investing from an evergreen fund, LDC typically deploys GBP 5m-100m in equity on businesses generating EBITDA of GBP 1.5m-25m, with the flexibility to invest in both minority and majority deals.

LDC also took advantage of the strong exit market with 18 divestments made last year, realising nearly GBP 900m in proceeds with an average money multiple of 2.5x, Garner said.

Some of its latest exits include portable and temporary traffic light systems SRL Traffic Systems, sold to 3i Infrastructure, as well as Paladone Products, a distributor of gift supplies, acquired by Ivest Consumer Partners.

The sponsor generally has a holding period of four years per company.

Among companies penned for exit are water pumps manufacturer Stuart Turner, according to a Mergermarket report.

Despite increasing market worries over high valuations for deals, as well as macro issues such as a high inflation rate and an increasingly hawkish interest rate environment, LDC believes that its evergreen funding structure will allow it to invest through economic cycles.

"There are no signs of volume and appetite changing despite punchy valuations out there," he said. "I don't see the market fundamentally changing. The market environment will always have its challenges whether pandemic or worries over the next recession, so you've got to be sure of the individual businesses you're backing."

Garner points to LDC's track record of investing in challenging periods, such as in 2020 when it deployed GBP 240m in new investments, which he says is significantly more than any of its closest competitors. In the previous economic cycle of 2008-09, the sponsor made investments in 32 companies, he added.

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