The company

Schneider is a leading German B2C (Business-to-Consumer) and B2B (Business-to-Business) distribution company with a focus on Germany, Austria and Switzerland (the DACH region). The business, which has turnover in excess of €250 million, has recently started to transform itself from a catalogue driven business into an online retailer, with an increasing proportion of sales occurring over the internet.

The B2C brands, Impressionen and Conley’s, were launched in 1995 and 1996 respectively, and are lifestyle and fashion orientated. Their ability to share the infrastructure of the rest of the Schneider group has allowed both brands to develop rapidly. The B2C parts of the business retail brands such as Boss and Tommy Hilfiger alongside Schneider’s own in-house labels. More recently the company has launched new brands such as Discovery and Gingar, which are aimed at younger customer groups.

The traditional B2B business provides promotional products (e.g. pens, coffee mugs, bags) alongside other items, which are mainly sold via catalogues, distributed to around two million small and medium sized businesses across Germany.

Investment rationale

Given Schneider’s strong market position and the significant customer base of the core B2C brands in the DACH region, we believe there is an opportunity to significantly increase the online sales within this business through increased investment in all aspects of e-commerce.

The B2C business produces an attractive product range as well as generating good margins, and is supported by the strong cash generation of the B2B business. The highly efficient logistics operations in Wedel, which are shared by both the B2C and B2B businesses, give Schneider very competitive operational costs in its sector.

Value creation

Since the buyout in October 2010 we have been working with management to augment the management team and have to date appointed a new CFO and a new non-executive director, Peter Higgins. Peter is currently chairman of Joe Browns, Crew Clothing Company and is a non-executive director of Charles Tyrwhitt; he was also previously chairman of Cath Kidston.

Business overview

OFFICE is the UK’s leading young fashion footwear retailer, offering a product range that is mid-priced and affordable. The business sells men’s, women’s and sports footwear and has a broad range of both third party brands such as “Converse”, “UGG”, “Adidas”, “Nike”, “Vans” and “Supra” which it sells alongside its own brands - “OFFICE”, “Ffor” and “Poste”.

OFFICE earns its credibility by consistently identifying key fashion trends and making sure that the ranges it retails anticipate the demands of the company’s target market of 15-35 year olds.

OFFICE first opened in 1981 and at the date of our investment had grown to 75 stand-alone stores in the United Kingdom and the Republic of Ireland and 46 concessions in House of Fraser, Topshop (including New York), Harvey Nichols and Selfridges. In addition it has a high-growth internet business.

Investment rationale

OFFICE is a substantial business, with turnover in excess of £150 million, and an excellent market position. The business’s range of both third party brands and own brands give it a defensible offering, and also good profit margins.

Value creation

Following our December 2010 buyout, as well as continuing strong growth from its existing stores, we see considerable further rollout opportunity in addition to significant potential from an enhanced web-shop. Further international expansion is also a real possibility at the right time, based on the strong relationships that OFFICE has with its key suppliers and building on our own extensive international experience.

The company

Kalle is a leading global producer of viscose, polymer and specialty casings for sausages. At the date of our investment, the company, which is headquartered in Germany, operated from ten countries with sixteen production sites globally.

Kalle focuses on leadership through innovation, and is probably the most innovative casings supplier in the world, with a wide range of products for a broad spectrum of applications.

Investment rationale

Silverfleet Capital has a long history of backing experienced and ambitious management teams such as the one found at Kalle. The business has an international profile with a market leading position, and has a reputation for delivering best quality products, competitive prices and new innovations that are developed together with customer needs.

Kalle has a large portfolio of new and ambitious product innovations, that enable the company to address growth opportunities in new segments and potentially new regions.

The business provides an exciting platform for a global buy and build approach both in casings and adjacent areas.

Value creation

We have worked with management on the international growth plans for the business – particularly in the US, as well as a buy and build strategy. Addressing both of these areas, in December 2010 we were pleased to announce the acquisition of Jif-Pak Manufacturing Inc, a California-based producer of innovative meat nettings and casings. The acquisition of Jif-Pak broadens Kalle’s product range and significantly increases the scale of its North American operations. Together with management we are working on the further international growth of the business, and the future buy and build strategy.

Business overview

orizon is one of Germany’s largest temporary work agencies (TWA) with some 9,000 employees and c90 offices nationwide. The company provides a multi-brand offering under the orizon umbrella, pooling the strengths of three TWAs, specialising in different sectors and regions: RP Personal (blue collar), RKM (engineering) and JiT (white collar and medical sector).

Investment rationale

The German temporary work market has experienced both high historic growth rates and good margins, principally as a consequence of some legislative changes in 2004 that lifted the restrictions on companies employing temporary workers.

Silverfleet Capital’s investment thesis was to build a network throughout Germany, thereby establishing a leading temporary staffing business. Through two add-on acquisitions orizon became one of the top 10 temporary work agencies and today is the last independent platform in the market.

Value creation

Shortly after we acquired Orizon in 2007, we invested in a centralised and highly efficient IT system that has enabled the company to control the assignment of each external employee. In addition, we helped to recruit a new CFO who was charged with significantly upgrading the financial system across the orizon group.

Our buy and build strategy was initiated a few months after acquiring orizon, with two major bolt-on acquisitions completed in June and July 2007, being SIR - acquired from Thyssen Krupp, and jobs-in-time. These two acquisitions further strengthened the network throughout Germany.

Investment overview

European Dental Partners (EDP), headquartered in Lübeck, Germany, is a leading dental consumables distributor, operating in Germany and Central and Eastern Europe.

The trade division, branded M+W Dental, sells dental consumables and small appliances via mail-order and through state-of-the-art web-shops. In the German market M+W Dental has more than 40% market share in the mail order dental business, supplying both, practices and laboratories. The production division – Interadent – manufactures high quality and low-cost prosthetics, with laboratories in Germany and the Philippines.

Investment rationale

EDP is a clear demonstration of one of Silverfleet Capital’s principal investment strategies – buy and build. Having acquired the platform company, M+W Dental, in October 2004, we identified the importance of expanding the company’s operations outside of Germany to capture both the growth of the CEE markets and increasing levels of dental “tourism”. This could largely be achieved using the existing German product ranges and infrastructure.

Value creation

Together with management we embarked on an ambitious buy and build programme, completing 5 bolt-on acquisitions in the first three years of our investment.

EDP acquired three businesses in 2006. The first was Dentamed, the market leader in dental distribution in the Czech Republic; this was followed by the acquisition of Stomatol, Dentamed´s principal competitor in the Czech market. Following these two acquisitions, EDP became the market leading dental distributor in the Czech Republic and a platform for EDP to expand further into Central and Eastern Europe was established. At the end of 2006, EDP diversified its service offering when it acquired InteraDent, one of the largest dental laboratories in Germany.

Two other major acquisitions were completed during 2007: Prodent International, the Slovenian market leader in dental distribution; and Dentatus, which operates in Croatia. In addition to setting up “green field” operations in Switzerland and Austria in 2005, EDP also entered the Hungarian dental distribution market in 2007.

Outcome

In April 2011 we agreed to sell EDP for €170 million in a strategic trade sale to Lifco Dental International AB, the dental products division of Lifco AB, a privately held Swedish industrial group. The sale generated a return of approximately 2.5x our investment.

Business overview

Sterigenics, headquartered in Oak Brook, Illinois, delivers contract sterilisation and ionisation services to the medical device and pharmaceutical industries using ethylene oxide, gamma radiation and electron beam radiation modalities. In addition to sterilising medical devices and other medical products, Sterigenics is also active in the fields of food safety and the modification of high performance and specialty materials such as semiconductors and polymers. Sterigenics has over 1,300 employees and operates from 38 service centres around the world.

Investment rationale

Silverfleet Capital led the primary buyout of Sterigenics in June 2004 for $311.5 million; the company was then a major division of a Belgian listed company. We believed that the market was underserved and that there was an expansion opportunity for a high quality sterilisation provider in both new and existing regions, notably in the fast-growing Chinese market.

In addition, we saw an opportunity to address certain operational deficiencies, both in the strategic development of the business, as well as an underinvestment in certain operational areas, specifically process information monitoring and reporting.

Value creation

Following our acquisition, the company built three large, new facilities; two ethylene oxide service centres located in Shanghai, China and Wiesbaden, Germany, and an electron beam service centre also located in Shanghai, China. In addition, Sterigenics expanded its operations in the United States, Mexico, France, Belgium and the United Kingdom. Overall in excess of $100 million was invested to increase the processing capacity of the business, which was a key driver in the strong 75% growth in earnings over the period of our ownership.

Alongside our investment in production capacity, we sought to address the operational issues, where we worked with management to reorganise the management structure. Central to the success of this restructure was our appointment of a highly experienced chairman, John Kane, to provide industry expertise and guidance for the management team. With an effective management structure in place, significant investment was made in the company’s operations including the multi-million dollar implementation of a new global, plant level IT system.

Outcome

Under Silverfleet Capital’s ownership, Sterigenics performed extremely well, almost doubling EBITDA. Together with a co-investor, we invested $117 million in the company in 2004, in November 2006 a dividend recapitalisation returned $75 million to investors, and in March 2011 the company was sold in a secondary buyout for $675 million.

Business overview

Histoire d’Or is France’s leading jewellery chain, retailing gold, silver and costume jewellery (including watches) via a network of over 200 stores. The majority of stores are located in shopping centres throughout France with a small number located in city centres. Histoire d’Or also has a presence in Italy, Belgium and Portugal.

Investment rationale

Prior to Silverfleet Capital’s investment, Histoire d’Or was operating 124 stores, a number which it had been steadily growing over the years. We were convinced that there was an opportunity to accelerate the roll-out of an already proven store concept, and in March 2006 we backed the existing management team, led by Eric Belmonte, in a tertiary buy-out.

The roll-out was aimed principally at locations in French shopping centres; both through organic growth as well as by purchasing existing stores owned by independent operators. We had also identified several potential acquisitions both in France and abroad; when we invested, in March 2006, the business was still an almost exclusively French one but there was potential scope to replicate its success in targeted neighbouring European markets.

Value creation

Soon after completing the acquisition of Histoire d’Or we set out to accelerate the store roll-out and, by the end of 2007, a total of 44 stores were added in France, 17 of which were a result of the acquisition of the Charles d’Orville chain. From this point, we continued to open an average of 7 stores a year in France, with a temporary pause for much of 2009 because of the economic slowdown.

In October 2007 Histoire d’Or bought its Belgian franchisee, adding a further eight outlets, to which it added another two stores in that market. After careful analysis we became convinced that there was an opportunity for Histoire d’Or in the Italian market, which bore some resemblance to the French marketplace, albeit more fragmented. A first store was opened in Naples in September 2007 and by September 2010, when we agreed to sell the business, there were 11 locations in Italy.

At the time of our successful exit in October 2010 Histoire d’Or had 208 stores, and had demonstrated that the existing store concept was working not only in France but also in Belgium and in Italy.

Outcome

In the spring of 2010 we received an approach from an investor group and after lengthy negotiations we concluded that the terms arrived at were unlikely to be exceeded in a competitive auction, and we therefore decided to exit. In October 2010 the business was sold for €417million resulting in a return of 3x cost and a 27% IRR.

Business overview

TMF is a global independent provider of management and administrative services, with operations in over 60 countries across Europe, the Americas, Asia, Africa and the Middle East. Key services include: book-keeping and reporting; domiciliary and management services; human resources and payroll; structured finance; and fund administration.

Investment rationale

Silverfleet Capital has a long track record of supporting investee companies to build scale and enhance their strategic value through buy and build. In 2003 we identified the wider trust and fiduciary services sector as an area of particular interest from a buy and build perspective. As well as benefiting from strong fundamentals, we saw several factors at work which we believed were likely to put significant pressure on the industry as a whole to consolidate, and which would also ensure a healthy supply of potential acquisition targets; namely: increasing regulation, an increasing client focus on compliance risk; demand for multi-jurisdictional services; and Sarbanes Oxley legislation, forcing accounting firms to divest certain services.

TMF was the third business in the sector that we took a close look at. With a strong service offering, high quality corporate client base and attractive international network we felt the business had the potential to be a strong consolidation platform.

Value creation

The transaction took almost a year to complete, with a number of complexities mainly in relation to the highly regulated environment in which the business operates. We worked closely with management during this period to tackle these challenges and to complete the transaction.

Our initial focus, prior to executing the acquisition strategy, was to build the board and ensure that the financial information, controls and internal resources within the business were of the highest quality and able to deal with a potentially significant increase in the size and complexity of the business. To this end a Chairman and new CFO were appointed shortly after closing. The second tier finance and control functions were strengthened under the new CFO and a strong internal due diligence and integration team were established. In addition, the decision was taken to divest a number of complex non-core financial service companies, in order to allow management time to be focused on the high growth core business.

Thereafter TMF commenced an aggressive buy and build strategy. The business completed over 50 acquisitions, including key acquisitions from the Big 4 accounting firms in South and Central America, and Asia, creating first mover advantage for TMF in these key high growth regions. In addition to the initial €15m acquisition facility, we were able to assist the company in raising c. €50m of senior and PIK facilities to support the buy and build programme.

During the course of our investment, TMF increased its geographic footprint from 23 to 60 countries, and employees from 900 to over 2,300. Coupled with strong double digit organic growth rates and a consistent focus on quality of service, TMF emerged as a leader in the provision of outsourced management and accounting services on a global scale.

Outcome

In 2008 we initiated an auction process and in October 2008 we completed the sale of the business to Doughty Hanson and management for €750m, achieving a 6x money multiple and an IRR of almost 60%.

The deal was awarded the France and Benelux Deal of the Year at the European Private Equity Awards.

Business overview

Operating from a network of twelve production facilities across Europe, North and South America, Asia and Africa, JOST is one of the leading global manufacturers of safety-critical components to the truck and trailer industry. The Company supplies interface systems (fifth wheels, towing hitches, trailer couplings) to each of the major truck and trailer OEMs under the well recognised brand names JOST, Rockinger, Regensburger and Tridec. These brands have an established reputation for the highest quality and reliability.

Investment rationale

We completed the acquisition of JOST in 2005, attracted by the company’s strong management team and longstanding reputation for engineering, innovation, safety and service. We identified the growth opportunity of establishing JOST as a truly global platform, maintaining the strong position in established products in Europe, whilst pursuing opportunities within Asia (in particular China and India) and Russian/Eastern Central Europe. In addition, we looked to back the company’s pipeline of product developments, notably in the core fifth wheel and landing gear segments as well as entering into new product segments such as suspensions, axles, hydraulic components and loading systems.

In addition there was a potential opportunity to implement a buy and build strategy focussed on the three main development routes: product portfolio expansion, access to additional technological competencies and access to additional OEM customers through both, geographical extension and market share consolidation.

Value creation

Following our acquisition, we further strengthened the management team with the appointment of a non-executive chairman, Matti Paasila, as well as a CFO, both of whom had extensive experience of organic and acquisitive growth strategies.

We supported management’s initiatives to improve operational performance, such as the transfer of the Munich-based trailer couplings production facility to Hungary; the acquisition of JOST's South African distributor; a worldwide working capital reduction programme; the introduction of a number of new products, such as ‘AirRelease’ and ‘Lubetronic 2’; and the establishment of a Joint Venture with Kamaz covering Russia and the establishment of a new facility in Poland to cover the local markets in CEE.

Alongside these operational developments, we helped the company to pursue a buy and build strategy, acquiring Tridec, a forced steering systems producer in Western Europe.

Outcome

Having received a number of approaches from both trade and financial buyers, we initiated a sales process in January 2008, and concluded a sale to Cinven generating a 3.1x return and an IRR of 45%.

Business overview

Phadia is the global leading in-vitro allergy diagnostics company, specialising in the development, manufacture and marketing of complete blood systems to support the clinical diagnosis and monitoring of allergy and auto-immune diseases.

Headquartered in Uppsala, Sweden, Phadia has international operations in nineteen locations, supplying over 3,000 laboratories in sixty countries.

Investment rationale

Phadia was a global leader in its niche of allergy diagnostics but within the larger Pfizer group it had demonstrated relatively low growth historically and was not a clear strategic fit with other parts of the group.

Silverfleet Capital has deep sector knowledge in healthcare and specific experience of investing in the diagnostic sub-sector, having owned Oxoid, a supplier to microbiology diagnostic labs. In 2004, we were working with an industry adviser, Iain Ross, who had previously been CEO of Allergy Therapeutics and were convinced that the field of allergy and allergy diagnostics would continue to grow. In particular we believed that we could support Phadia in its ambition to take in vitro allergy diagnostics into the USA, where traditionally allergy testing has been conducted using “skin prick” tests only.

In addition to the market opportunity, in Phadia we saw that there was an opportunity to improve the operational efficiency of the business and reduce costs significantly as a stand-alone entity. The company had also substantially completed a major capital expenditure programme, investing in a next generation of diagnostic equipment to install at its clients’ laboratories; and that with increased cost control and good working capital management, Phadia was set to be extremely cash generative for the next few years.

Value creation

The acquisition itself was a highly complex carve-out from the Pfizer group, involving nineteen simultaneous asset purchases and regulatory filings; however we are very experienced at such transactions.

We helped to build the incumbent management team with a number of additional executive and non-executive appointments to help drive efficiencies and support international growth. With this deeper management resource, the cost efficiency programme was able to be implemented swiftly and resulted in an immediate and substantial profit uplift.

Soon after our investment we invested in a pilot programme in the USA, recruiting sales representatives and demonstrating that the US market was ready for in vitro testing. The business also continued to invest in research and development of a “doctor’s office” allergy test, which obtained FDA approval shortly after our exit.

In 2005 we supported management’s buy and build ambitions, with the acquisition of a key supplier of rare allergens to Phadia in a €44 million deal, which gave the business security of supply and also captured increased margins.

Outcome

Due to Phadia’s strong cash generation, we were able to refinance the business in September 2005, returning 105% of cost to our investors. Subsequently in 2006, with the investment thesis proven, we initiated a dual-track sale process with an auction to trade and private equity purchasers being run alongside a potential flotation of the company.

In January 2007 we completed the sale of the business to Cinven for €1.3 billion resulting in a return of 4.8x cost and a 95% IRR. The deal was awarded Large Deal of the Year 2007 by the BVCA.

Business overview

BST Safety Textiles (now known as Global Safety Textiles) is a leading, global automotive supplier, focussed on the development, production and marketing of airbag fabrics.

Investment rationale

With operations across Europe and a small presence in the US, BST had a strong market position due to its cost and technology leadership. We were attracted to BST’s strong customer and supplier relationships, strong R&D and outstanding reputation for product quality.

Following our €86 million acquisition in August 2005, we pursued a strategy of growing the business through increasing its market share in the US, by increasing its international presence organically, by realising some economies of scale and through the sale of non-core operations.

Value creation

Shortly after our acquisition, we appointed a new Chairman and worked with management on the expansion of the US business, as well as entering the Asian market.

Outcome

Following an unsolicited approach soon after our investment, we initiated a sales process that resulted in the €157 million trade sale to International Textile Group in September 2006, generating a 2.1x return and an IRR of 72%.

Business overview

Headquartered in Lyon, Orefi (now renamed Orexad), is a leading multi-specialist distributor of industrial supplies in France and in Europe. Orefi distributes a wide range of industrial products such as power transmission supplies, cutting tools and abrasives, fixings and adhesives and personal protection equipment.

Investment rationale

We invested in Orefi with the aim to further consolidate the market which was highly fragmented in France and in Europe at the time. We identified Orefi as a solid platform with a proven track record of identifying and integrating small and medium-sized industrial supplies companies. Also at the time Orefi was in many respects a federation of semi-autonomous businesses and there was a need to effect a transformation into a fully integrated group.

Value creation

Following our initial investment, we swiftly embarked upon a buy and build strategy and during the period of our ownership, a total of 23 acquisitions were made in France. In addition, in 2000 the company entered the Dutch market with the acquisition of Biesheuvel.

In parallel, we worked with management on the integration of the existing business, with tangible improvements at various levels, notably purchasing and logistics, which resulted in a positive impact on working capital.

In order to address the next stage of the Company’s development, and as planned at the time of our investment, in 2002 we recruited a new CEO, Pierre Pouletty, who replaced Marcel Sengelin, who became semi-executive Chairman.

Silverfleet Capital put in place a financing structure to fund acquisitions, which contributed to the success of our buy and build strategy. We refinanced banking facilities to allow more flexibility in the financing of small acquisitions, and through the 2002-04 down-turn we also provided an equity facility to continue to fund acquisitions.

Outcome

Having successfully executed our buy and build strategy, having addressed the management succession plan, and having demonstrated that the internationalisation of the business was achievable, in January 2006 we initiated a sales process involving both trade and private equity.

The scale and network coverage of Orefi made it an attractive target for the main trade players in the French market, and in June 2006 the business was bought by AD Group, a leading French competitor, in a transaction which triggered another wave of consolidation deals. From Silverfleet Capital’s standpoint, Orefi was sold for €117.3m or the equivalent of 1.8x cost.

Business overview

Barracuda Group is a national operator of pubs and bars, and is one of the top ten largest managed pub operators in the UK, with four distinct brands; Smith and Jones, Varsity, Barracuda Bar and Juniper Inns.

Investment rationale

Silverfleet Capital has a long and successful track record in the pub sector. In early 2000 the managed pub sector was out of favour with valuation multiples much lower than for tenanted pub businesses. We recognised this and therefore decided to sell our tenanted pub investment, Pubmaster and teamed up with Mark McQuater to pursue opportunities in the managed pub sector. Our aim was to buy and build a top quality managed pub business operating in niche markets within secondary towns and suburban high streets, which at the time were poorly served by other national operators. We reviewed a number of potential acquisitions before completing the £50 million acquisition of a high quality and largely freehold estate of 35 pubs from Enterprise Inns in July 2000.

Value creation

This was a highly successful buy and build with the initial acquisition being quickly followed in October 2000 with the purchase of AIM listed Ambishus Pub Company in a £36m public to private transaction which added a further 61 pubs to the group.

In September 2001, a further 50 sites were acquired from Wolverhampton and Dudley for £37m, these included 19 student focused Varsity pubs; and finally in October 2002 Barracuda acquired a further eight bars owned by Old Monk Plc.

In each case the acquisitions were rapidly integrated into the group, the lower quality pubs were sold and, with many of the remaining sites benefiting from a substantial refurbishment and rebranding programme, operational performance improved significantly.

We worked with the management team to set up a strong corporate structure for the newly created business including the introduction of John Conlan, an experienced leisure sector Chairman and the recruitment of a new Finance Director. Having made the various acquisitions and developed the four strong brands we moved the focus to the development of individual sites where the average return on investment for the 39 new sites opened was c.30%.

During the period of our investment, Barracuda became one of the top 10 managed pub companies in the UK, growing from 35 to 155 units with a development pipeline of more than 60 further sites. Branch EBITDA grew from £12.3million in 2001 to £29.3million in 2005. The business was the fastest growing managed pub company in the UK with market leading operating margins and won awards for Pub Company of the Year and Retail Brand of the Year.

Outcome

In 2005 we initiated an auction process to sell the business involving trade, property and private equity purchasers. In June 2005 the business was sold to Charterhouse Capital Partners for £262million resulting in a return of 3x cost and a 27% IRR.

The company

Finnish Chemicals, now renamed Kemira Chemicals and part of the pulp and paper chemicals segment of Kemira, is the largest producer of sodium chlorate in the Nordic region. Sodium chlorate is the main bleaching agent used in the production of the chemical pulp used in papermaking. In addition the company produces chlorine dioxide, chloralkali products and sodium borohydride, as well as having the largest caustic soda distribution business in Finland. Through the $96 million acquisition of Huron Tech in 2000 the company also became the fourth largest sodium chlorate producer in North America.

Investment rationale

Based in Finland and therefore in close proximity to its customer pulp mills, Finnish Chemicals had a strong domestic market position, proprietary technology and a high level of profitability. In support of an experienced chemical industry executive, who bought into the business alongside us, we saw the opportunity to develop the company through adding additional capacity in certain product lines and also to use it as a platform for buy and build in pulp and paper chemicals.

Value creation

The first step was to re-orientate the business towards its customer industries and away from functional lines thereby bringing a greater focus on providing services as well as products. This was followed by a significant investment into a new sodium borohydride manufacturing plant.

In 2000 the company acquired Huron Tech Corp. based in the South East USA for $96 million making it the fourth largest supplier of sodium chlorate in the North American market. In addition the businesses built sodium chlorate storage capacity in Sweden allowing it to win long-term supply contracts in that country.

As one of the largest buyouts completed in the Nordic region at the time, this was a landmark deal in which we used our UK deal-doing experience to complete an investment in a market where very few such transactions had ever taken place. The platform company was then expanded significantly through successful entry into key markets such as Sweden and the USA. At the same time additional capacity was added in complex high margin products and in value-added services.

Outcome

In April 2005 after a focussed auction process the business was sold to Kemira, Finland’s largest chemical company, in a transaction that generated a more than 4x money multiple.

Business overview

Astron was a leader in the field of document management and associated business process outsourcing services, with operations in the UK, Continental Europe, USA, India and Sri Lanka. Subsequent to our exit, the business was rebranded and is a core part of the Global Document Solutions business unit of RR Donnelley, a Fortune 500 company based in Chicago.

Investment rationale

Within the print management marketplace, contracts were becoming larger and more complex and customers were increasingly comfortable with outsourcing print management contracts to bigger suppliers with a demonstrable track record.

We had been working with Bob Thian, the former CEO of HMSO, with a view to acquiring a business in this space, developing it by acquisition, thereby enabling it to compete more successfully for the growing number of large outsourcing contracts becoming available within both the public and private sectors. In early 2000, we acquired the platform businesses, Tactica for c. £55 million.

Value creation

Following the acquisition of Tactica, we swiftly set about growing the business through buy and build, completing the £23 million acquisition of Astron in December 2000.

Astron’s CEO, David Mitchell, was appointed as CEO of the newly-merged Tactica and Astron entity. Under David’s leadership, we embarked upon a significant buy and build programme which enabled the company to expand its service offering, geographic reach, and the scale necessary to tender for major contracts.

In total, three further bolt-on acquisitions were made during the period of our ownership, culminating in the £130 million acquisition of edotech in April 2004.

Outcome

Towards the end of 2004, we commenced a dual track exit process, which concluded with the £520 million trade sale to RR Donnelly announced in April 2005, generating a 5.4x return and an IRR of 40%.

Investment overview

Oxoid, which is now the core part of Thermo Fisher Scientific’s microbiology division, is one of the world’s leading manufacturers and distributors of microbiological diagnostic products. Oxoid’s products are used in clinical and industrial laboratories worldwide to identify bacteria and other organisms causing disease and spoilage.

The investment rationale

Oxoid was a secondary buyout, the original buyout from Unilever having taken place approximately 3 years earlier. It was very clear to us that having successfully established themselves as an independent company with new IT systems, a new R&D pipeline and a growing share in the global prepared media market that the company was well positioned to grow strongly.

Value creation

During our ownership, in addition to the launch of several new products, a new prepared media facility was built in Perth, Scotland at a cost of £6 million and a small manufacturing plant was acquired in Adelaide, Australia. From its existing operation in Ontario, Canada the company was also able to significantly increase its sales into the US by expanding its American sales force. Through these actions and continued organic growth, Oxoid was able to approximately double its profits in just over 3 years.

The outcome

Oxoid was being prepared for an IPO when we received an unsolicited approach from Fisher Scientific, a large US listed laboratory equipment distributor. Fisher had decided to add value to its distribution operations by becoming vertically integrated into certain high value product areas and therefore Oxoid’s production of growing media products was a good fit.

The sale was completed in early 2004 generating a return of 2.8x and an IRR of 34%.

Business overview

In 1997 Gala was a bingo club operator owned by Bass plc, with c.130 clubs across the UK. As a strong number two in the UK, it represented an excellent platform from which to lead a consolidation of the bingo market.

Investment rationale

Prior to our investment in, we had been working for a number of months with a high quality MBI team to identify opportunities within the low ticket, high volume gaming sector. Gala, our preferred target, was without a senior management team, consequently our exclusive relationship with the MBI team, together with our strong track record in the leisure sector, was successful in ensuring that we were one of only 3 parties invited into a limited auction in 1997.

Despite being operationally undermanaged, we saw that there was a significant opportunity to improve underlying profitability and to improve the quality of the existing estate by exiting under-performing sites and initiating a selective new site roll-out program.

Value creation

Under Silverfleet Capital’s ownership, Gala completed three acquisitions with a total enterprise value of £145m, emerging as the clear number one in the UK bingo market. We worked closely with management to identify, negotiate and secure these acquisitions, arranging the debt finance necessary to support this buy and build strategy.

Outcome

Having successfully completed a consolidation of the UK bingo market, the decision was taken to seek an exit, and in April 2000, the business was sold for £370m in a secondary MBO, led by CSFB Private Equity who were looking to back the next phase of its strategic development plan, which involved expanding its interests into other high volume, low ticket gaming segments.

We remained strongly supportive of both the business, the management team, and the strategy for diversification, and so encouraged by the Gala management team, we negotiated to reinvest £20m alongside CSFB. We remained closely involved with the business over the following investment phase, taking a seat on the board and maintaining an active involvement in the subsequent investment strategy.

Within twelve months of the secondary MBO, Gala had made its first acquisition outside the bingo sector, acquiring Ladbrokes regional casino’s business for c.£235m. The acquisition was closely aligned to the strategy of diversification into other forms of high volume, low ticket gaming, and we were pleased to support the acquisition with a further £19m equity investment.

Over the course of our investment in the Gala Group, the business completed and successfully integrated four acquisitions whilst consistently achieving above market like-for-like sales growth and more than tripling EBITDA.

Both stages of our investment were highly successful for Silverfleet Capital, with the exit to CSFB generating a 28% IRR and 1.8x money multiple, and the tertiary MBO to Candover and Cinven, which valued the business in excess of £1.2 bn, generating a 54% IRR and 3.1x money multiple.

Business overview

Oasis Stores plc was a quoted ladies fashion retailer with two brands, Oasis and Coast, both aimed at the upper end of the high street market but targeting 18-30 year olds and 30 years plus respectively. Oasis traded from 130 stores in the UK (a mixture of own stores and department store concessions) and concessions in Europe, the Middle East and the Far East. Coast was a relatively new, loss-making brand, trading from 18 concessions and 9 own stores in the UK only.

Investment rationale

The Oasis group had been established by three highly successful retail entrepreneurs, but by 2000-2001 it was struggling with the next phase of its development. Hampered by poor management controls and obsolete stock issues the Company was required to issue a profit warning to the London Stock Exchange in 2001.

The company had recently recruited an experienced, professional CEO, Derek Lovelock, who was ambitious to conduct a public-to-private buyout, and our extensive sector knowledge in retail, and in particular in fashion retail, made us an obvious financial partner for them. The buyout was completed in 2001.

Silverfleet Capital had the retail insight to see that the business’ internal reporting issues could be resolved and were prepared to support Derek as he did this. In addition we were convinced that it was right to allow the management team time to see if Coast could be turned into a profitable brand.

Value creation

The public-to-private acquisition was launched in 2001, in the face of some minority shareholder dissent. Our extensive public-to-private transaction experience and some decisive action allowed us to successfully complete the deal.

Straightforward dialogue with management and our retail experience allowed us to rapidly improve the internal controls within the business, reduce working capital and develop a growth strategy for both brands. Coast was successfully repositioned as an up-market brand and swiftly moved from being loss-making to being highly profitable. We supported the rapid roll-out of the brand and by exit Coast had grown from 30 outlets to 123 outlets. We also worked with management to develop the more mature Oasis brand – through the roll-out of new stores and concessions, and also through range extensions into accessories, lingerie and shoes. We also successfully negotiated a joint venture in China for the roll-out of Oasis clothing into Chinese department stores.

Outcome

In 2003 we conducted a focused auction of trade and private equity purchasers. The auction resulted in the sale of the business to the Icelandic investment group, Baugur, for £150 million – a return of 3.6x cost and an 88% IRR.

The deal was awarded Middle Market Buy-Out of the Year 2004 by the EVCA/Real Deals.

Business overview

Moliflor Loisirs is a French casino owner and operator, created by Silverfleet Capital in June 1999 with the acquisition and take private of an operator of seven casinos in the Languedoc-Roussillon region of France and the simultaneous purchase of the casino of Uriage near Grenoble.

Investment rationale

After two aborted attempts to acquire casino groups in 1997 and 1998, we became known in the market as having a keen interest in the French gaming industry. Consequently we were approached by Philippe Gazagne, ex co-president of the Groupe Barrière, who was putting together a management team.

We had established that there was a genuine consolidation opportunity in the French gaming industry, where more than half of the sites were at that time still owned by private individuals and families. With the establishment of our platform company, we backed an ambitious buy and build strategy to create one of France’s leading casino groups, applying professional management methods to formerly owner-managed businesses.

Value creation

Five acquisitions were successfully completed, adding a total of six casinos, and a seventh site was built in Port Crouesty. These acquisitions took the total number of casinos owned and operated by the group from eight in June 1999 to fifteen in April 2001 and in this time, we increased our original investment of €25million by more than three times whilst the profit at EBITDA level, starting at €10million, grew five-fold. This was in part thanks to the positive environment of the French gaming industry, which was experiencing a double-digit growth rate, but more importantly systematically implementing professional management methods in the acquired sites.

From a two-man team at completion we helped form a complete management team within six months and supported management in setting up the monitoring and control systems necessary for a group of this size.

Outcome

In mid 2001 it was agreed with management to look for an exit, and in March 2002 the business was sold in a secondary buyout for €402million, generating an IRR of 52% and a multiple of money of 2.4x.

The company

Fired Earth was established in 1984 as an importer and retailer of handmade floor and wall tiles. Since then the product range has expanded to include paints, fabrics, rugs and furniture.

At the point of our public-to-private investment, Fired Earth operated 15 showrooms and 13 franchises in the UK and the rest of Europe, and was listed on the London Stock Exchange.

Investment rationale

We were attracted to the business because of its strong brand name and unique home furnishings proposition which in turn allowed the company to achieve high profit margins. There was virtually no direct competition in this niche market and we saw the opportunity to open further showrooms both in the UK and overseas as well as to extend the product range.

Value creation

At the time of its take private by Silverfleet Capital, Fired Earth needed to transition from being a small owner-managed business into one with modern systems and professional retail standards capable of supporting the planned further growth. We appointed a new Chairman, John Lovering, and a new CEO to take over from the founder to implement this change, which was accompanied by a successful roll-out of further showrooms and franchises.

The outcome

Fired Earth achieved a significant increase in turnover during the course of our investment and attracted interest from a number of potential trade acquirers. Eventually, in July 2001 we sold the business to Aga Food Services plc who were looking to increase their retail activities, generating a 2x money multiple.

Business overview

Pubmaster, the second largest independent UK pub operator, was acquired from Brent Walker Group plc in November 1996 in a deal valuing the business at £168m. At acquisition, Pubmaster operated some 1,600 pubs of which 1,500 were tenanted and 100 managed.

Investment rationale

Silverfleet Capital saw the opportunity for significant growth through acquisition, as the pub sector continued to consolidate. The strategic plan was to sell the managed pub division to take advantage of the high multiples in that sector and to reinvest the proceeds in tenanted pubs which were available at much lower prices. In addition, Silverfleet Capital backed management’s plan to improve the quality of the estate and enhance profitability, through a targeted programme of capital expenditure.

Value creation

Prior to implementing our planned buy and build strategy, we successfully realised Pubmaster’s non-core operations; in May 1997 the managed division was sold for £36.7m and the gaming subsidiary was sold to Bass for £5m.

With the business now solely focussed on its tenanted operations, in June 1999 we acquired 54 pubs from Devonshire Pub Company for £17m and 152 pubs from Mercury Taverns for £35m. Following a successful securitisation in July 1999, which raised £305m, we refinanced existing debt and acquired the freeholds on the leased pubs for £105.2m. In the same month we raised £100m bridging finance to continue the buy and build strategy, acquiring 662 pubs from Swallow for £126.9m. On each acquisition, the business renegotiated with beer suppliers to achieve better buying terms as a result of increased scale. During the course of the investment significant sums were also invested to enhance the quality of the estate and several hundred underperforming pubs were sold.

Outcome

In December 2000 the business was sold to a trade consortium for an enterprise value of £499m, generating a 2x return and an IRR of 21%.

Business overview

Link Financial purchases and collects charged-off credit card receivables. These portfolios of credit card receivables are typically sold by the major credit card companies and consist of amounts owed by customers that are overdue to varying degrees. The collection of these debts is a time intensive activity and requires dedicated systems and personnel, and as such it is considered non-core by many credit card companies.

Investment rationale

At the point of our investment in 2000, the market for credit card receivables was at an early stage in its development; yet as the level of credit card debt was growing rapidly, the potential size of the market was considerable.

Value creation

During the course of our investment, the business grew from a fledgling operation to one of the leading purchasers of charged-off credit card receivables. As the UK marketplace became increasingly crowded, and Link’s ‘first mover advantage’ lessened, we supported management’s ambition to internationalise the business, and in 2004 Link opened its first overseas office in Madrid.

Outcome

Following a period of rapid growth, in 2005 we initiated a limited auction and successfully realised our investment, generating a strong return for our investors.

Business overview

Aesica Pharmaceuticals is one of the world’s top 12 pharmaceutical contract manufacturers (“CMOs”). With manufacturing and development facilities in the UK, Germany and Italy, Aesica is forecast to turnover in excess of €180 million for 2011.

Aesica has the expertise to both develop and manufacture primary (API) and secondary stage (finished product dosage form) pharmaceuticals, partnering with pharmaceutical companies throughout the key stages of a drug’s life cycle to supply product from initial development through to final commercial supply.

Aesica was founded in 2004 when the management team acquired a BASF production facility in Cramlington, Northumberland, and today supplies many of the world’s leading pharmaceutical companies. The company’s unique proposition lies in its flexible and bespoke approach to service delivery, as well as a capability to supply to each stage of pharmaceutical development. The long-established and proven expertise within Aesica enables it to provide primary and secondary contract manufacturing services to the highest possible regulatory standards.

Investment rationale

Global outsourcing of pharmaceutical manufacturing was worth approximately $44 billion in 2010, and is forecast to grow at c7% for the foreseeable future. This growth will principally be directed towards those CMOs that are focussed on quality, reliability, delivery and excellent customer service. Aesica’s reputation within the marketplace as such a high quality CMO partner, with the scale and breadth of service capability to serve a range of outsourcing opportunities, makes it well positioned to win new contracts and to acquire further sites.