One of the benefits of having a successful track record of investing in growth companies for over 40 years is our experience in offering a full range of flexible investment and exit options.
One of the less publicised aspects of private equity is that of minority investing. This helps founder-entrepreneurs to “cash out and stay” by realising some equity value whilst retaining an ongoing equity stake to benefit from any increase in future value.
Over the last four decades we have found that this solution often appeals to founder-entrepreneurs who want to de-risk their personal financial positions where a considerable amount of their wealth may be tied up in one private company. At the same time a full exit does not appeal because they may view their job as unfinished and can also see the attractions of continued involvement given confidence in the future growth prospects of their business. Many also reach a stage where they want help from experienced growth investors in expanding the business further. A partial cash-out and investment can be used as a catalyst to enable a variety of new initiatives such as:
- overseas expansion
- new investment in areas such as people, technology or product development; and/or
- enabling some other members of the team to “step up” into the equity and prove themselves ahead of a future full exit as part of necessary succession planning.
In the case of CarTrawler the two founders, Niall and Greg Turley, wanted to take a step back from the day to day running of their business, crystallise some of their value but also share in the future value creation of the business they had founded.
We supported their desire to step back from their executive roles within the business but remain significant shareholders. The business was ready to move into its next growth phase and we backed Mike McGearty to run the business as CEO. During our investment CarTrawler’s senior management team was significantly strengthened with the recruitment of five C-level executives, a sector focused Chairman with over 30 years’ travel sector experience and a new strategy director.
When we invested in Clarke Energy we took a minority stake in the business to help further accelerate its international growth, both organically and through acquisitions. We backed the existing management team led by Jim Clarke, Chairman, and his son Jamie Clarke, CEO.
Our investment in rhubarb facilitated the founder, Lucy Gemmell, to fully step away from the business. She had already sold a portion of the company to the management team and wanted to exit completely. ECI invested in the company to support the existing team, led by CEO PB Jacobse, in growing the business and take advantage of the considerable number of business development opportunities.
When we invested in Fourth – founded by restaurant entrepreneurs Derek and Edwina Lilley – we backed the management team, led by the CEO, Ben Hood and introduced Neville Davis as Chairman. When looking for investment the founders, along with Ben Hood, wanted a partner who would support the internationalisation of their business and help them to grow it further.
During our investment, Fourth expanded internationally, acquiring Adaco in September 2012, a US based SaaS business focused on the international hotel sector, to support its US expansion strategy and in November 2014 Fourth acquired Team Hours, a transformational labour productivity business. Significant investment was made in Fourth’s product including new modules and data analysis.