Minority deals are on the rise, with 115 minority buyout deals in 2020 totalling almost €29.7bn, according to Unquote Data. That is almost treble the year before. Whilst minority buyouts aren’t new territory for us, with over a third of our investments being minority deals, it’s certainly something we’re seeing more CEOs aware of and asking about as part of deal processes.
What is causing that increase? Well, the pandemic may certainly have had an impact. Uncertainty always creates a catalyst to de-risk, and a minority investment offers an alternative liquidity event, whilst still allowing the management team to retain majority control.
Minority deals are also understandably popular as it allows a liquidity event now, whilst CEOs can continue to maximise the value of their business, with an investor alongside them to support them in achieving their growth objectives.
It also provides an alternative for CEOs and Founders that may be concerned over the loss of control associated with having new shareholders. Minority deals can be constructed in accordance with terms leadership teams feel comfortable with. At ECI, we are flexible around whether we do a minority or a majority buyout as for us a successful partnership always relies on collaboration and the relationships we build, not degrees of control. If we are aligned with the management team on the potential of the business, that will always be the biggest driver of success. Regardless of deal structure, we’re there as needed to support management teams on projects that drive value.
An example of that might be where we have invested to support a business with their buy and build strategy. A minority investment may provide capital for M&A, whilst we can also support management teams map the market using our proprietary AI tool, Amplifind™, and reach out to potential targets. For example, we completed a minority investment in the SME marketplace, Bionic, four years ago. Since that time, we have supported CEO, Paul Galligan, to build an acquisition strategy and reach out to targets, completing six acquisitions since our investment, significantly expanding Bionic’s capability. Paul says of his experience of the support ECI can provide: “If I take a personal element, one area where I had really next to no experience, was of acquisitions, and it’s something ECI has stacks of experience in, and now we’ve done a number of acquisitions in my time here.”
Other initiatives might be international expansion. For example, ECI completed a minority investment in programmatic marketing specialist, MiQ, in 2017. Since that time Founder and CEO, Gurman Hundal, has opened seven new offices, with a particular focus on the US market. Since investment the business has seen an 80% increase in North American revenue. ECI have been able to support Gurman on a number of key initiatives, including recruiting a CEO for the US and Australia, key milestones in the business becoming a leading global player. MiQ is a great example as to the fact that deal structure doesn’t change how we can support management teams, with Gurman stating: “Our business is so much better. It’s made our business even more scalable, and stable and we’re just got a better business on all levels.”
Some recent minority deals at ECI:
Moneypenny, the world’s leading outsourced communications provider, and KB Associates, an independent provider of management company and consulting services, are our most recent deals as part of our latest fund, ECI II.
If you’d like to find out more about how a minority (or a majority!) investment might work for your business, please do get in touch with firstname.lastname@example.org.