The business of buy-outs

Early-stage venture demands balanced risk-taking and mega-deals can betray an old-school macho M&A culture. But the mid-market is where UK dealmakers must box clever to get returns for their funds, and they have to work from the first bell to the last round. The days of returns driven by low interest rates have gone, and value creation is key.

So which were the busiest buy-out houses last year in the £5m-100m investment range? Which firms were regularly doing UK mid-market deals, requiring deal origination and transaction services advice? What have they invested in and, crucially, what is now on the horizon for them?

1 LDC

Eight buy-outs in 2024

In short

Capital Evergreen investor, funded by the balance sheet of its owner, Lloyds Banking Group. Invested around £1.2bn over the three years from 2022 to 2024

Offices Birmingham, Bristol, Cardiff, Edinburgh, Leeds, London, Manchester, Newcastle, Nottingham and Reading

On the cycle

Last year, LDC invested £410m in 17 businesses new to its portfolio. Eight were majority-stake buy-outs, listed here. It also invested £40m in follow-on funding for existing portfolio companies and supported 49 bolt-on acquisitions.

John Garner, LDC managing partner, says this “reflects both our appetite to invest and the quality of businesses we’re seeing. Our regional footprint and sector knowledge mean we’re in the towns, cities and industries that will drive the UK economy forwards.”

Faced with macroeconomic headwinds, says Garner, “management teams want experience, flexibility and strategic input, particularly when it comes to executing complex growth strategies like buy-and-build, which require the support of investors with deep sector understanding and integration experience.”

The deal

In 2024, LDC also completed 12 exits giving an average money multiple return of 2.5x. Exiting its investment in estate agent platform Lomond generated a 13.0x return. LDC reinvested alongside new investor IGG for its next stage.

“We don’t take a one-size-fits-all approach to holding periods,” says Garner. “Our partnerships are shaped by the individual business’s growth journey.”

2 Inflexion Private Equity

Eight buy-outs in 2024

In short

Capital In 2022 Inflexion closed its Buy-out Fund VI at £2.5bn, to be invested in UK and European companies with an enterprise value of up to £1bn

Offices London, Manchester, Amsterdam, Frankfurt, Stockholm, Bangalore, São Paulo, Shanghai, Singapore

Hitting bullseye

Inflexion increased its new control investments last year, committing more than £1bn – in line with its usual annual investment rate. It also supported 60 acquisitions by its portfolio companies. 

Says Flor Kassai, managing partner and head of buy-outs: “Our strategy focuses on high-growth, high-margin businesses, sourced primarily off-market. We build long-term relationships, often years before investing, so we are the preferred partner when the time comes. We focus on verticals or sub-sectors that tend to demonstrate low correlation with the broader economic cycle. Within those, we pick companies that are winning share and are market consolidators.” On average, she adds, Inflexion portfolio companies grow top-line revenue at around 20% per annum. 

The deal

In December 2024, Inflexion invested in Nodor, a UK-headquartered premium darts equipment firm. “It is high growth, high margins, strong international potential, with a significant opportunity to leverage emerging digital technologies,” Kassai says. “Plus, as first-time private equity investors supporting a family-owned business, this is exactly our kind of deal.”

Inflexion holds investments for four to five years and over the past three years has completed 24 exits at an average 3.5x gross return. The biggest challenge for today’s UK mid-market investors, she says, “is finding businesses that can sustain earnings growth despite volatility”. And in some cases, she adds, founders and management teams have an increased desire to find a proven private equity partner to help navigate these conditions.

3 YFM Equity Partners

Six buy-outs in 2024

In short

Capital In November 2023 YFM closed its Buy-out Fund III at £95.5m. In 2024 it made five investments from the new fund, with the other investment being the final buy-out of its £80m Buy-out Fund II

Offices Birmingham, Leeds, London, Manchester and Reading

First funding

YFM closed its first buy-out fund in 2017 and has since then completed a total of 25 mid-market buy-outs. It has made eight realisations for a 4.7x multiple return. YFM invests at the lower end of the mid-market, investing £3m-15m in buy-outs and growth capital opportunities. It has been going for 42 years and has £750m of assets under management.

The deal

In November last year YFM invested £8.7m in Omne, a Bedfordshire-based full-service, end-to-end, specialist B2B marketing agency with a client base that’s focused on leading food and beverage brands.

“The vendors had hired an experienced operational management team to run the business day-to-day, ahead of their planned exit,” says David Wrench, partner and head of new investments for the South. “Specialist agency advisers Cactus were supporting this process and we were introduced to Cactus to discuss providing funding to support the team in acquiring the business from the vendors.

“Management already had a small stake in the business as part of their succession planning. The transaction facilitated a small amount of cash out to them, but saw them reinvesting the majority of their value into the business.”

The transaction was equity funded by YFM, with a small amount of senior debt from Triple Point. “That will provide plenty of equity and debt firepower to support potential acquisitions,” says Wrench. 

“The base case is an organic plan, but we think there could be interesting value creation opportunities through targeted acquisitions – through service and product extension or geographical expansion.”

4 ECI Partners

Five buy-outs in 2024

In short

Capital In September 2023 ECI closed its 12th buy-out fund at £1bn, 40% up on its predecessor ECI11 fund of £700m

Offices London, Manchester and New York City

The deal

Last year ECI acquired Independence Governance Group (IGG) from LDC, which retained a stake in the business. LDC first invested in Ross Trustees back in November 2020, before backing the creation of IGG in February 2023 when it merged with Independent Trustee Services.

ECI partner Michael Butler says IGG is now very much in investment mode: “We are looking at opportunities that will grow our core pensions business, as well as adjacencies such as data and audit management and digital governance solutions.” He says they are also looking at acquisitions outside of pensions that leverage the firm’s existing relationships and skillset, including corporate secretarial, incentives planning and corporate governance.

IGG has enhanced the management team with the hiring of a new CFO and chair, which Butler says was always the plan. There have been internal promotions, too. He says there are no further plans as it is now “a strong and well-built out team”.

So what attracted ECI to the deal? “This is an area of the market we’ve been tracking for more than a decade and IGG is a business that is growing strongly, has very sticky customers and is led by a great management team,” says Butler. “We and LDC shared the same view on the growth potential of IGG and were encouraged that they were looking to roll a stake. We are delighted to be working alongside them.”

5 Bridgepoint

Four buy-outs in 2024

In short

Capital Bridgepoint Growth II is a £200m fund that invests UK and Nordic small-caps 

Offices London headquartered with international offices in Amsterdam, Frankfurt, Luxembourg, Madrid, New York City, Paris, Seoul, Shanghai and Stockholm

6 Bowmark Capital

Four buy-outs in 2024

In short

Capital Manages and advises more than £2bn in funds, and invests up to £200m in buy-outs

Offices London

7 Northedge

Three buy-outs in 2024

In short

Capital Manages more than £900m of assets and invests £2m-50m

Offices Birmingham and Manchester

8 Palatine

Three buy-outs in 2024

In short

Capital Invests £10m-£50m from the £220m Palatine Private Equity Fund IV, which closed in 2021

Offices Birmingham, London and Manchester

On the level

Palatine senior investment director James Painter says he expects investment rates at the firm to stay level over the coming years. “As a growth-focused investor we will continue to invest in supporting our portfolio companies, whether through supplementing the teams we back, increasing sales resource or investment in IT to drive operational efficiencies.”

He says that in the mid-market a key challenge to investing is economic uncertainty: “Businesses are holding off on making large investment decisions. This is causing deals to slip or be paused, which is impacting financial performance of businesses. We are also seeing spend in certain sectors being reduced, for example in the public sector.” 

The deal

In September, Palatine invested in Bluprintx, a strategic digital transformation consultancy. Painter, who sits on its board, says: “The deal was originated through our technology services sector focus. The strategy is to create a global digital transformation consultancy of scale with capability across the Adobe and Salesforce technology stack. The business has a presence in EMEA, North America and Australia and New Zealand – we are looking to acquire capability in these regions. Since we invested, we have acquired two businesses: ITG, an e-commerce specialist with operations in North America and Hungary, and Skie, a Salesforce consultancy based in Australia. The ambition is to create a challenger consultancy to the likes of Accenture or Deloitte.”

9 Rcapital

Two buy-outs in 2024

In short

Capital Invests up to £20m in buy-outs

Offices London

10 NVM Private Equity

Two buy-outs in 2024

In short

Capital Undisclosed

Offices London, Manchester and Newcastle