GP Profile: Lonsdale Capital Partners

Click here to view a complete profile of Lonsdale Capital Partners, including a comprehensive list of LPs and their individual commitments, as well as up-to-date portfolios, on unquote" data

"Alan, Ross and David set up Lonsdale back in 2009, starting fundraising shortly thereafter, but the market at that point was extremely tough so we looked to fund deals on a deal-by-deal basis instead. This model worked well in that market and we quickly built up a strong following of investors, so continued investing in this way," says Lonsdale partner Ben Evans.

The first investment they made was UK claims management company EMCAS in January 2011. Between 2011 and 2015 included the GP made seven core investments.

"In 2015 we decided to test the market again as there was clearly appetite from LPs who we had kept in touch with for a fund. We had made six or seven investments by then and had exited two – OEG and CJ Fallon – so had started building a solid track record."

Lonsdale held a first close for its maiden buyout fund in October 2015 and then a final close on its hard-cap of £110m in April 2016. The investment thesis was and is the same, with the private equity house looking to typically invest around £10m in predominantly UK businesses with an EV of £10-50m. The GP uses debt financing, where appropriate, in its deal-by-deal investment strategy, and has also used clearing banks such as Santander and RBS, as well as private debt providers Praesidian and Beechbrook since it started making investments from the fund.

The LP base is 80% fund-of-funds, family offices and pension funds with the remainder being high-net-worth individuals.

"Raising an institutional fund has certainly helped to grow the firm's profile and reputation – once you've raised capital, people do think of you on a different scale," says Evans. "But when we look at the investments we made on a deal-by-deal basis, compared with the investments we have made from the fund, there has been no significant change to the way we approach deal doing."

To date, roughly one third of the £110m fund has been deployed with additional capital earmarked for add-on transactions, which is a core part of the Lonsdale strategy, says Evans.

Indeed, over the last 12 months, the GP has made a number of bolt-on acquisitions, the most recent of which was only last month when Lonsdale added ACA Marine to the larger Mallorca-based super yacht painting company Global Yachting Group (GYG). Other bolt-ons include Avalon's acquisition of Plan My Funeral and Ocean Media's acquisition of Mercury Events and LMC.

Typically Lonsdale
Currently there are seven platform companies in the portfolio: Amerplast, Avalon, Global Yachting Group, Nucore, Nutrisure, Ocean Media Group, P2 Consulting and The Mobility Group. Exited companies include CJ Fallon, EMCAS and OEG.

A typical Lonsdale deal is usually a founder-built company, with a solid management team and often characterised by a degree of transaction complexity, whether in terms of the nature of the business or its ownership structure, explains Evans. The owner will typically want to realise most of their value, but roll over a proportion of their capital into the company. The GP will typically help a business develop its product or general approach, expand geographically, or support its growth strategy – either organically or, as is the case with most Lonsdale companies, through acquisitions.

"We aim to make at least 3x money, and often closer to or even more than 5x, by backing good managers and helping them to build teams, strategy and footprint," says Evans.

Lonsdale's second deal - UK based pre-paid funeral plans provider Avalon, acquired in November 2012 - is a good example, says Evans. "It was founder-owned and built up over 10-15 years. The business model was interesting as it was a financial services business enabling you to lock in the cost of your funeral now," explains Evans, adding that funerals and associated costs are currently going up roughly 8% a year. "It wasn't your usual private equity story as it was trickier but we don't shy away from businesses that are not necessarily straight-forward."

The owner received capital after selling a majority stake but stilll has a seat on the board, which the GP really encourages. "When we first see a business, the founder typically wants a life change – to get out of the day-to-day running of the business and move more into a non-executive strategic role, which we can help with," says Evans.

Origination
"The trickiest thing is selecting the right deals as we see a lot of dealflow at the small end. Probably 90% of the deals we would take a look at aren't quite right and we want to concentrate on the 10% that are," says Evans.

Being a smaller PE house, the GP sources most of its leads from the advisory community and business networks. It also sometimes sources companies through mini or broken auction processes with roughly three to five parties involved.

Lonsdale's acquisition of the Mallorca-based superyacht service provider GYG in March 2016 came from Alan and Ross's Irish business network, with the GP winning a mini-auction in 2015.

"Not a lot has changed for Lonsdale since I started. We have remained in the lower mid-market and stuck with our strategy, so in a way we're not affected in the same way from the increase in competition, prices and valuations as those in the mid and upper end of the market," Evans says.

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