Phoenix confirms Sygnature sale to Five Arrows

Greg Gille
29 June 2021

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Phoenix Equity Partners has confirmed it has sold Sygnature Discovery, a UK-based drug discovery firm, to Five Arrows Principal Investments.

Phoenix generated a return of more than 5x on the sale, according to a source familiar with the situation.

Phoenix declined to comment on the deal.

In mid-June, Unquote sister publication Mergermarket reported that Five Arrows had won a heated auction for Sygnature, citing several sources familiar with the situation.

Five Arrows, which secured the asset via an accelerated process, will now take over Phoenix's minority stake, three of the sources said. The sell-side fielded first-round bids in early June after sending teasers in April, one of the sources said.

The deal valued the business at around £300m, or 20x its £15m EBITDA, three of the sources said.

Phoenix invested in the biotechnology business in 2017 alongside management. The deal was the fourth investment from Phoenix's 2016 fund, which held a final close on £415m. Since then, Sygnature has acquired in vivo pharmacology company RenaSci, in vivo oncology firm Alderley Oncology, and drug metabolism and pharmacokinetics (DMPK) specialist XenoGesis.

Sygnature's number of employees more than doubled and profits increased threefold over the holding period, according to Phoenix. According to public documents at the time of the 2017 deal, Sygnature generated a turnover of £11.2m in the year ending in March 2016, with a gross profit of £5.4m. Public figures for the year to March 2020 show turnover of £31.3m (up from £26m the year before) and gross profit of £15.9m.

The sale of Sygnature is the second exit announced by Phoenix in as many days, following the sale of Rayner to CVC, which generated a 4.3x return. Overall, it is Phoenix's fourth exit this year, following the sales of Bridge Leisure, Just Childcare and Rayner.

This is also the third exit from Phoenix's 2016 Fund, following the sales of Travel Chapter for 3.6x cost in 2019, and the aforementioned Rayner SBO.

Five Arrows Principal Investments, the private equity arm of Rothschild Merchant Banking, held a final close for its Five Arrows Principal Investments III (FAPI III) buyout vehicle on its €1.25bn hard-cap in 2019. The fund targets mid-market companies across Europe with enterprise values in the €75-300m range. The fund's sector focus is limited to healthcare, education, data, software and technology-enabled business services.

Company
Nottingham-headquartered Sygnature, which provides outsourced drug discovery services to biotech and pharma companies, employs around 450 research scientists with particular expertise in in vitro and in vivo pharmacology, and drug metabolism and pharmacokinetics.

People
Phoenix Equity Partners – Kevin Keck, Barry Robinson (partners).
Sygnature Discovery – Simon Hirst (CEO).

Advisers
Equity - Alantra (M&A); Shoosmiths (legal).
Vendors – Deloitte (M&A, tax); Eversheds Sutherland (legal).