Active reaps 8x money on sale of Evans to ECI

ECI invested via its ECI 10 fund, which closed on its hard-cap of £500m last year. The vehicle focuses on assets in the UK mid-market with an enterprise value of between £10-150m. Evans' management also secured a minority stake. Leverage – which was kept to a moderate level, according to ECI – was provided by a two-bank club.

All parties declined to disclose financial details pertaining to the deal, which several media reports have valued at around £100m.

ECI had been tracking the asset for a long time, according to partner Jeremy Lytle. The sale process, which is understood to have been particularly competitive, was run by Canaccord Genuity. ECI secured exclusivity a few weeks prior to the deal being announced.

Active Private Equity acquired a majority stake in Evans in 2008, in a deal understood to value the chain at around £35m. Sales have since quadrupled to reach an estimated £130m, according to Active. Earnings are understood to stand at around £7-8m.

According to Nick Evans, partner at Active, the original deal came about thanks to the GP's strength in the consumer sector and its long-term partnership approach. "The company's family owners were looking to sell the business in 2007 and had appointed advisers. I had met the father and son around the same time. However, they then decided not to go ahead with the sale but I remained in contact with them." Due to Active's plans to accelerate the company's growth, further conversations between Evans and Active culminated in an investment focused on building up the company and unlocking a sale in the future.

Securing the deal was only the first step in a long journey, however. "When we came into the business it was 89 years old - so it had a long history and a well-established reputation. We wanted to build on that business history and passion. The employees are amazing people that live and breathe cycling and we were keen to harness that through a better business structure. But the business needed serious investment, especially in areas such as IT, which included a front end website as well as enterprise software."

While the investment strategy was clear: to accelerate the company's growth through better infrastructure and IT systems, as well as a boosting its multi-channel offering, the process was not plain sailing. "We chose to implement a new IT system in the second year of the investment and it took around one to two years to fully implement. It was a significant investment. So in years two and three we struggled to get a grip on the big infrastructure projects while keeping up with day-to-day trading of the business. There was a lot of execution risk."

But despite investing in a consumer business in 2008, and one with big ticket items (some of Evans' bikes retail between £7,000 and £11,000), Active was confident in consumers' growing appetite for bicycles. "We felt there was a resurgence in cycling coming, driven by the 2008 Beijing Olympics and then strengthened by 2012 London Olympics, and this was an important factor in our decision to invest," says Evans. 

The vendor reaped an 8x return on its investment.

ECI stated it was attracted by the growing popularity of healthy lifestyles, and cycling in particular, as well as Evans' position as a popular multi-channel retailer with a high-street presence in addition to online sales. The new owner is expected to continue the growth strategy previously followed by Active and the company's management.

Cycling retailers have, indeed, proved a good match for private equity in the past. Bridgepoint notably backed the £180m SBO of Wiggle – one of Evans' main competitors – in a deal that saw vendor Livingbridge achieve a 69% IRR in 2011.

Company
Established in 1921, Evans Cycles is a specialist cycling retailer that operates 56 stores across the UK, selling bikes and accessories, as well as maintenance services. The company also runs an e-commerce website. Evans employs 1,000 staff and is headquartered in Crawley.

People
George Moss led the deal for ECI Partners. Active Private Equity was represented by Nick Evans.

Advisers
Equity – McQueen (M&A).
Vendor – Canaccord Genuity (M&A).

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• Topics
• UK / Ireland
• Consumer
• Buyouts
• Exits
• United Kingdom
• Secondary buyout
• ECI Partners
• Active Private Equity
• Unq2015June