WestBridge exits bChannels to trade for 4.2x money

Wahida Ahmed
25 February 2022

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Small-cap buyout investor WestBridge has exited bChannels, a UK-based provider of marketing services for technology vendors, in a sale to The Channel Company, a US-based IT service provider backed by Eagle Tree.

The deal delivers 4.2x on the total amount invested in the portfolio company, which included development capital, and an IRR of 24%. There were no further follow-on investments beyond the development capital, according to the GP.

WestBridge invested in bChannels through WestBridge SME fund, which held a final close on GBP 30m in April 2012 after two years on the road, according to Unquote Data.

The sponsor backed the Oxford-based business in July 2014 in a GBP 3.5m secondary buyout from RCapital, according to Unquote Data. RCapital had acquired bChannels in 2012 from its previous owner Adventis Group, as part of the company's liquidation proceedings.

The original deal was introduced to WestBridge by Grant Thornton's Thames Valley team.

Speaking to Unquote, WestBridge partners Guy Davies and James Macleay said that WestBridge was approached by The Channel Company and therefore initiated a managed sale process. This included participation from undisclosed trade and private equity buyers. "The Channel Company was the natural buyer of the business. Its logical for both companies as there is complementary cross-over and similar customer base," said Macleay. "The driver for the Channel company is to integrate and expand its geographical footprint. It is a private equity-backed business that is executing a buy-and-build strategy."

This transaction marks the seventh exit from WestBridge SME fund and is one of the last two companies left in that fund, Davies and Macleay told Unquote. The fund invested in eight companies overall.

Davies and Macleay added: "DB Pixelhouse is the other company and we are seeking to exit it by the end of 2023." The GP highlighted that its average exit multiple is 3x and the bChannels transaction will move that average up.

WestBridge originally held a significant minority stake in the business that was later increased to a majority stake. The GP told Unquote that the company had retired part of its loan notes before the exit.

According to a statement, under WestBridge's ownership the company doubled its revenues and tripled profitability. The business is on track to achieve GBP 26.5m of turnover and GBP 4.8m of profit by 2025, according to the GP.

With the support of WestBridge, the company has strengthened its senior management team with appointments including a non-executive chair Richard Bandell, who oversaw the geographic expansion and enhanced the company's offering, according to the same statement. WestBridge's Davies and Macleay said: "Under our tenure the business achieved geographic expansion followed by improved quality of earning. As the business has grown, we have added executives and non-executives." The company has opened up two offices, in Madrid and Kuala Lumpur, during the period.

The Channel Company offers complementary services to bChannels and has been backed by investment firm Eagle Tree Capital since November 2021.

Company
bChannels is headquartered in Oxford and was founded in 1999. The company has 152 employees and has offices in the US, Spain, Australia and Malaysia.

It provides market intelligence, digital marketing services and customer engagement strategies to technology companies. Its clients include HP, Lenovo, Xerox and IBM.

People
bChannels – Phil Gowing (CEO).
WestBridge – Guy Davies (managing partner); Valerie Kendall (founding partner); James Macleay (senior investment manager).

Advisors
Vendor – Capital Law, Tom Kelleher, Catherine James, Jordan Thomas (legal); Grant Thornton, Gareth Davies, Arthur Munro-Faure, Angela Haygarth (corporate finance); Crowe, Bob Alsop (financial due diligence); Fairgrove, Patrick Woodrow (commercial due diligence).