DLG Holdings Ltd (United Kingdom) - Oct 2007

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01 October 2007

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Kaupthing Capital Partners has acquired DLG Holdings Ltd (formerly Data Locator Group) in a £75m secondary buyout from Promethean Investments LLP. The consumer lifestyle database business was sold through an auction process run by Rothschild. Kaupthing competed against two financial buyers and one trade buyer in the final bidding round and cited the fact that its offer was seen as more deliverable due to its relationship with its in-house debt provider Kaupthing Singer & Friedlander. Additionally, Kaupthing’s strong sector knowledge helped it form a strong relationship with management. Kaupthing’s David Sherratt had previously made an investment in the space while he was at ISIS Equity Partners and had looked at DLG in the past. The deal took 10 days to complete from exclusivity. Kaupthing Singer & Friedlander provided £27.5m of senior debt alongside a mezzanine tranche worth £10m. Kaupthing takes a 50% stake in the newco. It anticipates growing the company through a combination of organic growth and acquisitions with a reported ten acquisitions already in the pipeline. The growing demand for data in an environment of addressable advertising made DLG an attractive investment for Kaupthing.

Exit deal

Promethean has achieved an IRR of 102% and a cash multiple return of 2.9x its investment from the exit from DLG. Promethean held the investment for less than 20 months and generated a gross cash return of £46.2m. Having received a number of approaches for the business, Promethean hired Rothschild to assess its options. Promethean backed the £23.5m management buyout of DLG in March 2006. It made a further investment of £3.2m in October 2006 to support DLG’s acquisition of Wegener DM (6 November 2006, page 22). This deal helped to create the UK’s largest provider of consumer lifestyle data with the fit of Wegener’s primarily paper-based surveys beneficial to DLG’s online and telephone-based data collection procedures. DLG also acquired online data provider 43 Plc during Promethean’s ownership.

Company

London-based DLG provides consumer lifestyle data to the UK direct marketing industry. Its portfolio includes volunteered information from 21 million individuals gained through multi-channel lifestyle survey programmes with data from its network of consumer brand partners. DLG employs 100 staff and to the year ended 30 June 2007 generated profit before interest and tax of £7.5m on a turnover of £20.5m.

People

David Sherratt and Forbes Stuart led the buyout for Kaupthing and both join the board of DLG. Mike Biddulph led both the original investment and the exit deal for Promethean.

Advisers

Management - Linklaters, Hardar Cars (Legal)Purchaser - Kaupthing Bank, Benjamin Lee (Corporate Finance)Purchaser - Pinsent Masons, Andrew Masraf, Darius Lewington (Legal)Vendor - AMR International Ltd, Jim Easton (Other Due Diligence)Vendor - KPMG, Sanjay Thankar (Other Due Diligence)Vendor - Rothschild, Alex Mathe, Dominic Wallis, Samantha Lloyd (Corporate Finance)Vendor - Travers Smith, Paul Dolman (Legal)