• Bank happy to feed hungry heroes of the middle market


    Jon Herbert, Head of the Acquisition Finance team talks to Catherine Wheatley from The Sunday Times.

     

    "Last year was a great one for Aesica Pharmaceuticals.

     

    boy-2011quoteIn June the Newcastle upon Tyne company secured a debt package to fund its acquisition of the medical research-and-development firm R5. The deal followed the purchase of plants owned by Merck and Abbott, which, taken together, have helped to lift profits by 106% a year, from an annualised £3.5m in 2007 to £14.7m in 2009.

     

    The drugs manufacturer, at No 3 on this year’s Sunday Times Deloitte Buyout Track 100, has been pursuing a buyand- build strategy since it was bought out of the chemicals giant BASF in 2004 with backing from LDC, the UK regional mid-market private-equity house that is part of Lloyds Banking Group.

     

    Looking ahead, the £20m package of working capital, expenditure and acquisition facilities, arranged by Lloyds Bank Commercial Banking, will help Aesica to take further advantage of growing demand for outsourced pharmaceutical services, according to the pharmaceutical company’s chief executive, Robert Hardy.

     

    Lloyds Banking Group’s commitment to building longterm relationships with outstanding firms such as Aesica lies at the heart of our ability to support promising ventures and their private-equity backers through the downturn and beyond. Our determination to understand our clients’ businesses gives us a clear picture of the associated risks and opportunities, and allows us to lend to them with confidence.

     

    We provide debt to 26 firms on this year’s league table, including the lifestyle retailer Cath Kidston (No 18), which is backed by TA Associates, and the fast-expanding Japanese restaurant chain Yo! Sushi (No 82), held by Quilvest. Many are companies that we have supported for many years.

     

    For example, in 2005 we became the first big bank to use the services of the credit reference agency Callcredit Information Group (No 62). We went on to provide debt when the firm was bought out from Skipton Building Society by Vitruvian Partners in 2009.

     

    But over the past 12 months we have also forged strong new partnerships with private equity houses and their portfolio companies. As the economic outlook improves, we are encouraged by the potential returns on capital invested in private equity compared with other asset classes. We are also persuaded by the risk profile of such deals, where private-equity investors now supply as much as half of the capital themselves.

     

    As a result, the acquisition finance team within Lloyds Bank Commercial Banking almost quadrupled its lending in 2010. We supplied £1.9 billion of funding across 52 deals, making us Europe’s biggest acquisition-finance lender.

     

    For example, last March we completed our first transaction with Risk Capital Partners when we provided a package of debt to support the management buyout of the car-repair business DWS Bodyworks. The company, at No 10 on the Buyout Track 100, fixes up to 50,000 damaged vehicles each year for insurers, including RSA, Axa and Zurich.

     

    We were pleased to back a firm that has become a leader in its market thanks to strong customer relations and efficient labour operations. DWS performed well through the downturn, helped by vehicleaccident rates that tend to stay constant through the cycle. Profits rose 84% a year, from an annualised £1.2m in 2007 to £4.1m in 2009. We look forward to supporting the company's plans to grow as it eyes acquisitions and adds new repair sites. Lloyds Bank Commercial Banking also supported the first deal out of ECI Partners’ latest fund when we jointly arranged debt for its £78m secondary buyout of XLN Telecom (No 6) from Zeus Private Equity last September.

     

    Profits at the company, which supplies phone and broadband service to small businesses, rose 100% a year from £2.9m in 2008 to £11.6m in 2010, after the acquisition of OneBill Telecom in 2009, which expanded the customer base. We expect XLN to gain further market share thanks to proprietary technology that enables it to offer outstanding service at attractive prices.

     

    Looking ahead, we expect our lending to grow again in 2011 as confidence across the mid-market sector improves. We pledge to support our longterm clients and seek outstanding new management teams as they recapitalise existing investments and pursue acquisitions.

     

    Grasping these opportunities will require a long-term trust and understanding between debt providers, private-equity houses and their portfolio companies, such as those on the Buyout Track 100.

     

    We look forward to being part of their future success".

     

2/25/2018 1:24:10 PM