We're delighted to announce that ECI has won Private Equity International's award for Operational Excellence 2022. The award recognises private equity firms across the Americas, Asia-Pacific, Europe, the Middle East and Africa that have delivered exceptional operational value to portfolio companies in the past year.
ECI won in the Small Cap category for its partnership with CPOMS, the leading provider of SaaS solutions to UK and international schools.
Product expansion was one of the key ways in which ECI supported CPOMS. We helped the management team with a customer engagement project through which CPOMS assessed demand for products that complemented its core child safeguarding and wellbeing software. This led to the launch of two additional products: CPOMS StaffSafe, which aims to strengthen governance relating to members of staff, and the CPOMS Engage module, which aids alignment and communication between schools and local authorities.
Not only did the business expand its product range during our investment, it also grew its geographical footprint. ECI’s commercial team worked closely with CPOMS’ management team to increase its presence in international markets, with a particular focus on the US and Canada. To help position it in North America, extensive market research was conducted to evaluate opportunities. CPOMS was acquired by Raptor, the leading US provider of school safety software, to further drive forward the strategy we helped the team to develop. Internationalisation efforts also extended beyond North Amera. The Yorkshire-headquartered company went from serving clients in four countries outside of the UK in 2018 to selling its products in 34 countries three years later.
The growth strategy was further strengthened by a focus on people, pricing and data analytics. We helped to introduce a finance director, chairman, as well as a finance and tech focussed non-executive director to help support the management team as it scaled. The firm also developed an advanced predictive analytics model that enabled the company to identify and convert sales opportunities.
As it grew, the company also sought to act in line with its mission of improving safeguarding for children. With the shift to online at the start of the pandemic, which placed an increased emphasis on the digitisation of safeguarding processes, CPOMS offered its student safeguarding tools for free to schools without digital systems in place to assist them in meeting their legal obligations.
In October 2021, CPOMS was successfully realised to private equity-backed US school safety software provider Raptor Technologies in October 2021.
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Leading SaaS HR provider, Ciphr, has appointed Imran Akhoun as its director of M&A to support the group’s strategic growth plans.
A new role for the Marlow-based group, Akhoun will report directly to Ciphr’s CFO, Ray Berry. He will work closely with the leadership team and board of directors. Akhoun will look to identify possible merger and acquisition opportunities, through to managing due diligence processes and coordinating transactions.
An experienced corporate development director, Akhoun joins Ciphr from SaaS supplier management platform Fortius Networks where he was focused on developing their European presence. Prior to that he held similar positions in various companies across HR, education, and marketing technology.
Akhoun’s appointment follows that of David Burns last month, who joined Ciphr as chief technology officer (CTO).
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We're delighted to announce that ECI has been recognised by the UK Tech Awards as one of the top tech investors of the year. The UK tech awards celebrates success, rewards achievement and raises the profile of the UK tech community. It recognises the fantastic growth of UK Tech, comprising tech sector investors, tech entrepreneurs, CEOs and FDs, and the corporate finance and investment community.
The tech investor of the year shortlisting follows a very successful period for ECI. The last twelve months saw us complete 10 exits, generating an average gross return of 4.2x and proceeds of £1.3bn over the last year. In tech that included successful exits in:
- One of the largest global programmatic media partners, MiQ
- The leading marketplace in the UK for SME services, Bionic
- Tech-enabled digital media service company, Imagesound
- Leading technology services business, digital transformation partner and Managed Services Provider (MSP), Content+Cloud
- The high-growth virtual insurer, with world-class machine learning technology, Avantia
- The leading provider of SaaS safeguarding software to schools, CPOMS
Congratulations to everyone shortlisted. We look forward to celebrating a very successful 12 months of investment activity with the tech community at the Awards in November.
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BCN Group, the Manchester based IT cloud and managed services specialist, is delighted to announce the strategic acquisition of Evo-soft, a leading Microsoft Dynamics 365 Business Central specialist. The acquisition follows our investment earlier this year.
BCN is a leading digital transformation solutions and managed service provider delivering cloud first data strategies. This includes Microsoft Modern Workplace, Microsoft Azure, analytics, development, and IT security services to the mid-market and public sector organisations. The acquisition of Evo-soft provides BCN with an exceptional platform to provide solution driven services for businesses across the UK. The move enhances the group’s focus on and capability of delivering services and solutions from the Microsoft ecosystem.
Founded in 2001, Evo-soft is a UK top 5 Microsoft Gold Enterprise Resource Planning (ERP) Partner. The solution focuses on implementing, supporting, enhancing, and accelerating the use of Microsoft Dynamics 365 Business Central for customers that want to build on process efficiencies, integrate their business solutions, automate manual processing of data, and gain operational control.
Evo-soft have developed their own bespoke software called Evo-supply for the importation, distribution, and simple manufacturing industries. The flexible distribution management software has been designed by Microsoft Dynamics developers with years of industry experience and is continually refined, ensuring new and improved features are available.
In addition, Evo-soft has created specialist software for auction houses, aptly named Evo-Auction, a seamless and cost effective, front and back-end content management integration tool. The software reduces errors, speeds up processes and provides full reporting of live auctions with full integration.
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As part of our ECI Unlocked programme we recently welcomed David Joyson, Chief Customer Officer at Avantia, the tech-enabled virtual insurer, to our Sales & Marketing Forum. He shared how Avantia have increased return on ad spend (ROAS) and his top secrets to getting there:
1. Focus on revenue, not just clicks and conversions
Your return on ad spend is only as a good as the data you are providing and getting out of your adtech. Most firms are on a digital marketing journey, and that means firms trying to improve the sophistication of that data. Most firms start that journey at manual bidding or cost per conversion, simply trying to get as many conversions as possible within their budget. One of the key secrets to increasing your ROAS is to enhance your data-driven maturity by focussing on revenue instead.
Most firms move from manual bidding and cost-per-click to start thinking instead about cost-per-acquisition. The problem with this is that it treats all acquisitions as equally valuable. It’s why firms should aim to move onto target return on ad spend. This metric measures the amount of revenue your business earns for each £ it spends on advertising. Because it treats each conversion as individual rather than taking an average, it allows you to invest more in ads where you are getting the most value.
2. Challenge simplistic forecasting models
What Avantia found when they were operating a Target ROAS model, is that they wanted it to be more sophisticated, i.e. with margin, lifetime value etc. A key early insight into their forecasting model was that the retail price paid by the customer didn’t correlate strongly with forecast lifetime value. In order to address this, they needed to provide better data and modelling. To increase ROAS they needed to forecast lifetime value, using factors such as cover type, retention propensity, and competition score (i.e., likelihood of winning the customer). All of this in a real-time bidding situation. By transitioning to a better quality forecasting model, they were able to get a truer reflection of which ads were delivering value.
3. Use machine learning to get greater accuracy in real time
Machine learning is what enabled Avantia to deliver on these aims of delivering a sophisticated ROAS with enhanced data. Avantia built their own microservice application, Marpod, which connected their historic data warehouse with Google ads, google analytics, google tag manager, as well as their own quote site, contact centre call data and on-site messaging service.
By connecting Google Ads with this enhanced decisioning platform, they could deliver real-time decisioning in paid search based off a more accurate customer LTV forecast. Marpod has delivered a significant uplift on Avantia’s ROAS and overall lifetime value. And now the machine learning tool is set up they can continue to test and improve their ad investment. If the model sounds impressive, it is! In fact, it led to the Avantia team being recognised at the Drum Digital Advertising awards last year for Best Paid Search Campaign.
As stated at the start of this piece, most firms are on a digital marketing journey. However, if you focus on revenue, the quality of your forecasting model, and ideally using machine learning to optimise your accuracy over time, you’ll be well on your way to increasing your return on ad spend.
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It's fantastic to be able to look back at an exceptionally strong 12 months for ECI, completing 10 exits and generating an average gross return of 4.2x over the last year.
Together, these exits delivered £1.3bn of proceeds, and include the recent sale of MiQ, one of the largest global programmatic media partners, for a 6.1x return, following a five-year partnership that saw MiQ execute an ambitious North American expansion strategy.
Other recent exits include Bionic, the marketplace for SME services, for a 4.8x return, with Bionic successfully making six acquisitions during our investment, and Content+Cloud, a leading technology services business, digital transformation partner and managed services provider, for a 4.1x return, following strong organic and acquisitive growth during our partnership.
Today’s figures highlight ECI’s continued strong record of providing hands-on support to portfolio companies looking to unlock growth opportunities. We work hand-in-hand with management teams, working alongside them on projects that drive value, such as international expansion, product strategy, or employee retention. These results also follow our expansion into the United States with an office in New York to support the international growth aspirations of its portfolio.
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We're delighted to announce that ECI's Manchester team have been shortlisted for Private Equity/Venture Capital Team of the Year at the Insider North West Dealmakers Awards.
Dealmakers is the opportunity to celebrate the achievements of the North West’s leading corporate financiers, accountants, bankers, funders, lawyers and private equity professionals.
ECI's Manchester team had a very busy last 12 months, leading successful exits in Chesterfield-headquartered Imagesound and Skipton-headquartered CPOMS. Mark Keeley also led a new investment in Manchester-headquartered BCN Group, one of the fastest-growing independent Managed Service Providers in the North of England. The team have also supported significant value creation activity in two other northern investments in the portfolio, Moneypenny and Mobysoft.
Congratulations to everyone shortlisted, and we look forward to celebrating a very successful 12 months of investment activity with the North West community at the awards ceremony in October.
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At ECI we’ve supported our portfolio to make c.70 acquisitions since 2010. No two acquisitions are ever alike but having supported a number of management teams to deliver their first acquisition, we’ve seen some common steps and decisions along the way:
1. Will M&A deliver better ROI for your strategy?
Before any company starts thinking about M&A strategy, the first step is to consider the overall business strategy, and whether M&A will deliver the best ROI. If you’re thinking about adding new capability or launching in a new geography, M&A may well be the best option. However, you may also be able to execute on those strategic goals organically.
Things to consider include:
- What are the market dynamics and availability of acquisitions?
- Are you prioritising building scale quickly?
- Or could the funding set aside for that acquisition help your business growth further and faster if used elsewhere?
We regularly work with management teams to help come to the answers to such questions, using market and company data.
2. M&A strategy
Once you’ve determined that M&A is the best strategy for acquiring new capability, broadening the addressable market in a new geography, or building scale, what next?
- The first thing is to develop an M&A origination and execution plan that can deliver. We always like to have the conversation about strategy as early as possible. Often, we’ll talk it through with management teams before we even invest, and those conversations can carry through to the first strategy day. It means everyone is ready to hit the ground running and help the team deliver on their M&A objectives from day one.
- In some industries, the size and the volume of potential acquisitions can seem overwhelming. Understanding your key growth initiatives and what you need in an acquisition will help bring focus to the pipeline.
- Understanding how you are looking to integrate post-deal and the impact on your customers will help to further refine criteria.
- That said, it’s rare the ‘perfect’ acquisition exists. You may find that your strategy evolves in response to what’s out there. A good M&A strategy will flex over time in response to business needs and market availability. Keep discussing and keep iterating!
3. Sourcing M&A targets
- We believe it’s important to have a ‘total market view’ of the sector you’re looking at acquiring in before building a focused pipeline from that long-list.
- This is likely to include businesses you already know but having that view of everything that’s out there will inform your approach. It also will give you greater conviction in the right acquisitions.
- At ECI we use our experience and proprietary AI tool, Amplifind™, to help take the heavy lifting out of mapping the market, whether the space in question has a limited number or tens of thousands of market participants.
- This mapping process is something we recently used to support Peter Sweetbaum, CEO of Content+Cloud, on his buy-and-build journey. This work, alongside C+C’s network, resulted in six acquisitions during our investment. Peter commented, “The impact of the acquisitions on our growth was transformational and what we were able to acquire was really unique capability, at the right price with the right organisations that made a difference to the overall growth trajectory and the outcome.”
Successful M&A requires focus and conviction, but it’s important to start with a full market view and then narrow down and honing your criteria further. Some criteria might be available externally, such as employee numbers which can give a view to scale. Other areas such as cultural fit, will require a conversation and access to the people within a business.
4. Building relationships
- So, you’ve narrowed down the potential acquisitions that you think could be a good fit. Now it’s time to start building relationships. Those relationships aren’t just with the founders, CEOs and key decision makers. There will also be other market participants, brokers and advisors who might bring you deals.
- We often help management teams with that initial outreach. That can be helpful as a business owner may not want to speak to a direct competitor initially. Plus, it can be helpful to take something off the to-do list of the busy CEO’s, MDs and CFOs we work with!
- If you are doing the outreach yourself, try and think about what the individual would like to hear – personalise it and say why you’re excited by the potential fit with your own business. We all have increasingly full inboxes, so keep it short.
- Where an email isn’t suitable, it’s worth trying to seek an introduction via a mutual contact. Seeking out a CEO at an industry event might be even better.
- Relationships are much more than that first meeting. Make sure you invest time here. When you think there is a business you like, get on the train/plane and go and really get to know them. This will help you understand their ambitions and how they fit with your own. This will give you a much better chance of agreeing a deal.
5. M&A pipeline management and a single source of truth
- Whether your pipeline has a handful, 10s or 100s of potential targets on it, it’s important to have a ‘single source of truth’. When you’re at the start of your M&A journey a spreadsheet is just fine. But you may choose to move to a CRM system if M&A becomes core to your growth journey. Either way, agree who is going to own this. Owning includes making sure each meeting, assessment and next action is recorded.
- At ECI, we’ll often have dedicated monthly M&A catch-ups with the board over the course of an acquisition project. This gives us a chance to focus on priority targets, discuss how to convert them and refine the strategy. We’ve found it’s useful to separate these so that management teams can focus on M&A without it getting lost within other board matters.
- Remember, building a pipeline takes time. It’s rare you ring up a business owner and find there’s an opportunity to do something straight away. You’ll need to remember to get back in touch, continue to evaluate opportunistic inbounds and try to unlock other high priority targets. Moving acquisitions along a pipeline is a bit of a juggling act!
It can be easy in that situation to feel like you’re part time M&A Director, as well as a full time CEO or CFO. If M&A is high priority, you may choose to recruit additional acquisition resource. We’ve helped teams to build those in-house M&A functions so they can give acquisitions focus and really drive the pace.
6. Doing the deal
- We’d recommend tailoring your approach to an acquisition opportunity depending on whether it’s a competitive process against other bidders, or an off-market conversation.
- Where it’s a competitive process, you will need to balance the time spent diligencing the business with focus on winning the opportunity.
- There are key questions to consider:
- How important is price?
- What have similar businesses sold for?
- Who are other potential acquirers? How can you differentiate?
At ECI, we look at over 600 potential deals a year, so can share what we’re seeing on deal pricing and structuring.
- Diligence can be time consuming! Knowing the financial and legal dd providers you’d like to work with ahead of time can save you many hours. Investors like ECI will have recommendations as well as being able to help with the ‘heavy lifting’ that diligence entails, so that you can continue to drive the core business forward.
- Another time saver when you’re looking to make more than one acquisition is compiling ‘boiler plate’ resources such as timetables, NDAs and information request lists.
7. Post-integration strategy
Integration is the last step, but it’s something that is important to think about in your conversations with vendors during the M&A and due diligence. If these considerations are left until post-acquisition, it means its harder to hit the ground running. But also it’s harder to assess whether a potential acquisition target fits with your customer’s needs and overall strategy.
Key integration questions include:
- How will the teams integrate culturally?
- How will commercial models (e.g. sales incentives) be made consistent across the group (if indeed they need to be)?
- Which tech systems will be used to ensure consistency of data?
- What will the roles of key individuals be going forward?
- What is the brand strategy?
- Is the combined group going to stay multi-brand?
- How will you drive growth through potential cross-sell and up-sell of products and services?
There is no right answer to these questions, but it’s much easier if you have a viewpoint prior to the deal and this is often facilitated through thorough pre-completion planning and focused due diligence.
Much like the initial deal process, sticking to a timetable for integration is important. For larger projects you may want to bring in Project Management Officer support. It’s something we frequently support our portfolio on, understanding integration priorities and then connecting teams with the relevant support.
So why go through these steps at all? Bolt-on acquisitions can be a great way of going further faster by bringing scale, internationalising, or adding capability. In the last decade we've helped 20 portfolio companies make 70 bolt ons - it's something we've seen add value time and time again. If you'd like to chat about how ECI can help you with your M&A ambitions, get in touch here.