Gala was one of the UK’s most successful bingo club operators and went on to become a leading consolidator of its market.
In 1997, Bass owned Gala, which had about 130 clubs across the UK. It was already a strong number two when we invested in the company.
We had hoped to invest in the low ticket, high volume gaming sector for some time. Gala, our preferred target, lacked a senior management team; our exclusive relationship with the management buy-in team, combined with our strong track record in the leisure sector, ensured we were one of just three parties invited into a limited auction in 1997.
Gala was operationally undermanaged but we saw significant opportunity to improve underlying profitability and the quality of the existing estate. We would do this by selling under-performing locations and initiating a selective new site roll-out program.
Under our ownership, Gala emerged as the clear number one in the UK bingo market, having completed three acquisitions with a total enterprise value of £145m. We worked closely with management to identify, negotiate and secure these acquisitions, arranging the debt finance necessary to support the buy and build strategy.
After consolidating the UK bingo market, we sold Gala in April 2000 for £370m in a secondary buyout led by CSFB Private Equity. CSFB would lead the next phase of Gala’s strategic development plan, which involved expanding its interests into other high volume, low ticket gaming segments.
We remained strongly supportive of the business, management team and diversification strategy so, encouraged by the Gala management team, we negotiated to reinvest £20m alongside CSFB. We remained closely involved with the business over the following phase, taking a seat on the board and maintaining an active involvement in the subsequent strategy.
Within a year of the secondary MBO, Gala had made its first acquisition outside the bingo sector, acquiring Ladbrokes’ regional casino business for c.£235m.
Over the course of our investment in Gala, the business completed four acquisitions while consistently achieving above market like-for-like sales growth and more than tripling EBITDA.
Both stages of our investment were highly successful for Silverfleet. The exit to CSFB generated a 29% IRR and 1.8x money multiple. The tertiary MBO to private equity firms Candover Partners and Cinven, which valued the business at more than £1.2bn, generated a 54% IRR and 3.1x money multiple.