One of the Midlands’ most prolific investment firms has revealed plans to pump an extra £100 million into manufacturing firms.
The Midland arm of private equity house LDC has given the manufacturing and specialist engineering sector a boost after announcing a pledge to increase its investment from £200 million to £300 million.
LDC regional managing director Martin Draper told the Post: “In October 2011 we announced an initial commitment of £200 million and said we would be investing in specialist engineering firms.
“That figure is now up to £190 million in the first 18 months and we are about to increase that to £300 million.”
Since the £200 million investment LDC has put money into eight companies, including engineering firm PJD Group in Castle Donnington and packaging manufacturer Benson Group which has a Leicestershire operation.
The increased investment will see LDC continue to focus on mid-market businesses in the £10 million to £150 million enterprise value range and typically those with specialist manufacturing capability in niche sectors such as aerospace and defence, oil and gas, or power generation.
“We have invested in many good businesses,” Mr Draper added. “Because our investment has been successful we are increasing our commitment and allocating more capital – which we think is a good news story.
“By increasing the scope of the fund we should see more investment opportunities and hopefully put capital to work that should accelerate growth opportunities in what we see as fast-growing and highly skilled manufacturing and engineering businesses.”
The announcement of more funding comes on the back of the firm completing three major deals in a ten day period.
They included MBOs of Node4, a business based in Derby in data centre management and IT and communications and oil and gas engineering firm Rimor.
The third involved re-investment in MB Aerospace, a specialist engineering business in Derby, which also has an operation in the US.
“I have been doing private equity for 20 years and this sort of thing doesn’t happen very often,” said Mr Draper.
“But these deals are a reflection of our investment strategy, one that is about investing prudently and cautiously right through the investment cycle.
“Our strategy is about finding good management teams. If we find a good management team and a good structure that business will grow and create value.
“We like to work alongside them and to put in place financial deals and structures that allow them to have some more firepower to make further acquisitions to grow. MB Aerospace is a case in point – an engineering business that supplies Rolls Royce. When we first invested it was turning over £12 million – it’s now £110 million.”
LDC sees its Midland office as a centre of excellence for the engineering sector, with Steve Aston and Rob Schofield among the specialists.
And asked whether the activity and increased investment being offered by LDC was indicative of a wider resurgence in the Midland economy Mr Draper said he was optimistic. He added: “Yes, I would say the Midlands economy is on the road to recovery.
“There are a number of good success stories in the private equity arena and others, where people are working hard and the results are coming through.
“It is not a case of people waiting for it to get better – my sense is that people have worked extremely hard and a corner has been turned.
“Good investment opportunities have come and will continue to exist but is about having the work ethic and the confidence as an investor to continue to invest. We hope to continue to find and grow these mid-market local engineering businesses.”
Mr Draper said LDC was keen to continue investing, though it was also broadening its portfolio.
“We have completed about 20 transactions over the last 18 months and invested around about £220 million,” he said. “That is enterprise of just over half a billion pounds – and that is just in the Midlands business. In the context of our portfolio we have got 26 businesses and a combined turnover of those of about £1.2 billion.
“We are going to increase our manufacturing initiative and on top of that have invested in a number of consumer-facing businesses, a number of branded businesses and a couple of retail opportunities.”
