A new UK firm is taking a longer-term approach to investing. Andy Thomson looks at Rose Street Partners’ first investment, in Fuelsoft.
To put it mildly perhaps, Rose Street Partners has an eye on the very long term. “We’re less worried about the rapid growth and immediate change that traditional private equity looks for and instead look to encourage sensible long-term growth,” says Dan Skyte, its chief executive officer. He founded Rose Street in late 2023, and describes it as an investment firm with a unique holding company structure, which enables the firm to own companies permanently. The approach is different to what we’re used to from private equity: “What we’re looking for are high-quality businesses with a positive multi-decade outlook, owned by founders or families that care deeply about the future of their company after they exit.”
Rose Street’s first investment was completed in July 2024 with the acquisition of Fuelsoft, a provider of enterprise resource planning software and services to the fuel distribution and fuel card sectors. It keeps a great deal of traffic on the road, offering a mission-critical service to customers, administering 16.4m litres of fuel every 24 hours.
“Fuelsoft’s customers will often run their entire business on Fuelsoft’s platform, resulting in very long-standing relationships,” says Skyte. “Fuelsoft has served some of its clients for 25 years, which is a great characteristic for a business to have, and suggests a service that is delivered well and is highly valued.”
Relationships and mission-critical products are two of the factors that appealed to Rose Street. A third was the prospect of developing new products and services for existing customers, including supporting them in the green energy transition. One such example is the introduction of electric vehicle charge cards and related services, “as more and more vehicle fleets are operated with electric vehicles”.
A fourth factor, says Skyte, was the people. David Kingsman and John Allen have invested more than 40 years of their lives into Fuelsoft’s success and “are the type of people we want to work with”, says Skyte. Allen was the technical wizard, building out the product suite, while Kingsman was responsible for taking the products and services to market. “John built it and David sold it,” is how Skyte succinctly captures their importance to the business in its early days.
Both Kingsman and Allen have remained involved with the business since the Rose Street investment – alongside Fuelsoft’s team that continues to run day-to-day operations: Darren Priddey, Andy West, Glyn Highfield and Dawn Barratt. Rose Street has effectively given its backing to this team to deliver on the next stage of Fuelsoft’s growth.
Skyte believes Rose Street’s long-term hold model is well suited to companies that have been operating in niche industries for long periods. While the enterprise resource planning market has large-sized providers such as SAP and Oracle, Fuelsoft has tailored its solutions to the fuel distribution sector over multiple decades, providing unique functionality that is difficult for generalists to replicate.
“What their customers need to deliver is very specific, and for that you need particular features and functionality,” says Skyte.
Red flag checker
“The last thing you want is to uncover a major red flag that either impacts valuation or could have killed the deal after you have completed,” says George Thresh, an associate director at Buzzacott Corporate Finance, considering why firms such as his are brought in to perform financial and tax due diligence.
In the case of Fuelsoft, Thresh says Buzzacott’s involvement in the deal lasted around two to three months – and he was impressed by what he saw: “The company was professionally run with a finance function operating more effectively than we have seen in far larger businesses in the sector. This helped to drive what was an efficient and constructive deal process.”
Thresh says the government’s Budget at the end of October has given Buzzacott a boost in terms of deal flow, with tax changes expected: “It’s been a very active market for much of the year. Rumours around the Budget only accelerated that further. A lot of the deals we were working on had very tight turnaround times and a hard close of 29 October.”
Long-term focus
When Skyte talks about being invested in businesses for the long term, he means it. “We have no intention to sell any of the companies we buy,” he asserts. “Clearly the world is unpredictable, but our intention is to own businesses forever. I would love to be able to sit here in 20 years’ time and say we’ve never sold a company – that’s the plan.”
It’s an interesting contrast to the private equity model. Skyte was in the ‘traditional’ private equity industry for eight years at Hanover Investors Management and ECI Partners. He speaks highly of his experience and actively acknowledges the positives of the model in certain situations. His goal with Rose Street is to offer an alternative approach for business owners that like the idea of their company being operated with a long-term mindset after they exit.
The ‘buy and hold’ approach also had interesting implications for the debt financing used in support of the deal, from Leicestershire-based alternative lender ThinCats. FRP Corporate Finance’s debt advisory team advised Rose Street on the financing from ThinCats. The FRP team was led by partner Simon Sherliker, and included director Stuart Sweeney, senior manager Amit Bagga and manager Brad Gayler; together they managed a competitive process between multiple lenders to secure the financing. The funding will support the immediate transaction and the future growth plans.
“This deal exemplifies the strength of Fuelsoft’s market position and the confidence lenders have in stable, specialist businesses,” said Sherliker.
Gareth Read, ThinCats associate director, says: “The long-hold approach is quite interesting with different dynamics versus what we often see. Because you don’t have an exit, repayment occurs in a different way. You’re more focused on the repeatability and strength of cash flow. Software businesses are very attractive because of the recurring revenue element.”
Building reputation
For Rose Street, Fuelsoft represents the first example of a deal type that it hopes to repeat many times in the years to come – but each time with its own rationale. “We’re not trying to dominate a particular industry or merge companies together,” says Skyte. “We want to build a group of companies that are run separately, enabling them to remain nimble and entrepreneurial, and over time we’ll look to grow them and re-invest excess profits into more businesses.”
He adds that there are some things Rose Street can do that family or founder owners often struggle with a large proportion of their wealth tied up in one company. One example is long-term incentivisation for staff, which Rose Street looks to introduce across all of the businesses that they invest in.
“We are new and will have to earn this reputation over time – but our mission is to build the best possible home for founder- and family-owned businesses,” says Skyte.
Time will tell if Rose Street does indeed earn that reputation – just don’t expect the verdict to arrive immediately.
