Inflexion to exit Xtrac in SBO to MiddleGround Capital

Ero Partsakoulaki
31 July 2023

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UK-headquartered sponsor Inflexion has agreed to sell Xtrac, a UK-based producer of transmission-systems for the motosport industry, to MiddleGround Capital, a US and European middle market private equity firm.

The deal marks the seventh exit for Inflexion Buyout Fund IV to date. The vehicle, which closed on GBP 650m in October 2014, typically provided equity tickets of GBP 15m-GBP 75m, according to Unquote Data.

Unquote sister publication Mergermarket reported in April that the Lazard-run sale process for the business had entered the second round of bidding, with US-based buyout involved.

It was being marketed off an EBITDA in the region of GBP 20m for FY23, as reported. In the year ended 30 September 2021, Xtrac booked gross profit of GBP 13.9m against turnover of GBP 50.8m, representing a margin of approximately 27%, Companies House filings show.

Inflexion acquired Xtrac for an undisclosed sum following a sale process in 2017 in which the business off an EBITDA of GBP 10m, according to earlier Mergermarket intelligence.

Under the GP's ownership, Xtrac broadened its product offering and strengthened its electric vehicle transmission capabilities, with the overall revenue contribution of hybrid and electric vehicle transmissions systems more than tripling, according to a press release. In addition, the product offering and customer base was strengthened to include new hypercar models.

The business expanded its manufacturing capacity with the opening of a manufacturing facility extension in 2018, opened the in-house Xtrac Academy apprentice training centre last year, and expanded its US operation. The company also invested in its workforce, with the number of manufacturing staff and engineers increasing by close to 50% to more than 450 staff.

The GP's announcement marks the fifth exit for Inflexion's funds in 2023, following nine exits completed in 2022, collectively returning over GBP 1.6bn of proceeds to Inflexion's investors, according to the press release.

MiddleGround Capital typically invests in companies with more than USD 75m in revenue and generating EBITDA between USD 15m-USD 100m, headquartered in North America and Europe, according to its website. It makes equity investments of USD 20m-USD 350m, it said.

Company
Founded in 1984, Xtrac designs and manufactures high-performance transmissions for the motorsport, hypercar and supercar industry. The business supplies most of the world's top motorsport teams in both two- and four-wheeled racing categories across the globe, including Sportscar racing, NASCAR and Formula 1, according to the statement. It is also active in hybrid and electric vehicle developments.

People
Infexion − Simon Turner (managing partner), Richard Booth (partner & co-head of the Industrials sector), Ravi Shah (investment director), Ash Ravi (investment executive).
Xtrac − Adrian Moore (CEO).

Advisers
Vendor − Lazard (corporate finance); Pwc (financial due diligence); Roland Berger (commercial due diligence); Taylor Wessing (legal).