Graphite Capital sells U-Pol in £428m trade sale

The sale generated returns of 4.5x money for Graphite and marks the GP's largest ever exit in terms of enterprise value.

Axalta is funding the acquisition with balance sheet cash, the company said in a statement, adding that the purchase price represents a multiple of 12.5x the company's adjusted EBITDA.

Unquote sister publication Mergermarket first reported in October 2020 that Graphite was exploring an exit for U-Pol in H1 2021, subsequently reporting in April 2021 that the GP had mandated Baird to run the process. The company was to be marketed based on EBITDA of £22m, with interest largely expected to come from US trade buyers, the report said.

Graphite first acquired a stake in U-Pol in September 2002, with Barclays Bank providing a £56.25m debt package, according to Unquote Data. The GP exited the investment in December 2005 in a £75m SBO to AAC Capital (then known as ABN Amro Capital), netting a 3.2x money multiple and 55% IRR on the sale.

In 2010, Graphite backed the £139m buyout of U-Pol, citing its knowledge of the business and its resilience through the financial crisis as reasons for investing for a second time.

Elaborating on the reasons for re-investing, James Markham, senior partner at Graphite Capital, told Unquote: "We were attracted to the strong margins and the potential to increase those further. U-Pol is a highly cash-generative business, which was also an attraction, as was the prospect of growing further into a large global market. U-Pol had early-stage footprints in a number of countries that could be grown further."

RBS, HSBC, Clydesdale Bank and Bank of Ireland provided a £61m debt package to finance the acquisition in 2010, while the GP deployed equity via Graphite Capital Partners VII. The fund held a final close in May 2007 on £475m and invested in UK mid-market companies with enterprise values of £20-200m, deploying equity tickets of £10-60m.

During Graphite's investment period, the company developed its online sales channels and established its presence in the US, according to a statement.

Graphite makes buyout and development capital investments in businesses with enterprise values of £30-175m and is currently deploying equity via its ninth fund, which held a final close in July 2018 on £470m. The GP's latest investment is the acquisition of a minority stake in online higher education platform Higher Ed International, as reported.

The sale of U-Pol is the GP's third exit of 2021 and follows the sale of Performance Timber Products in June, as reported. 

Company
Headquartered in Wellingborough and founded in 1948, U-Pol manufactures and distributes automotive repair and refinishing products, including paint, protective coatings and accessories. The company manufactures around 1,000 products that are distributed in 100 countries, including in around 12,000 retail outlets in the US.

In 2019, the company generated EBITDA of £15.1m and turnover of £79.1m, versus EBITDA of £12.4m from sales of £71.9m in 2018, according to its latest financial statements.

Between 2010 and 2021, the company's sales more than doubled to around £100m, Graphite said in a statement. The company also increased its headcount from 120 to 340 staff. According to a statement from buyer Axalta Coating, the business expects to post EBITDA of $38m (around £27.6m) and sales of $145m (around £105.4m).

People
Graphite Capital – James Markham, Mike Tilburg (senior partners); Markus Golser (managing director).
U-Pol – Guy Williams (chief executive).

Advisers
Acquirer – Rothschild & Co (corporate finance); Morrison & Foerster (legal).
Vendor – Baird (corporate finance); Goodwin Proctor (legal).

• Tweet  
• Facebook  
• LinkedIn  
• Google plus  
• Send to  

• Topics
• Exits
• UK / Ireland
• Industrials
• Trade sale
• United Kingdom
• Graphite Capital