Oct 27, 2009

Downturn creates acquisition opportunities

Risk Capital Partners signs third bolt on acquisition this year – proving timing is right for buy-and-build model.

Luke Johnson’s Risk Capital Partners (RCP) private equity fund is pursuing an ambitious programme of buy and build acquisitions on behalf of its portfolio companies, as well as looking for brand new buy and build platforms, believing now is the ideal time to acquire companies.

“Current economic uncertainties means now is a great time to do deals for both our existing portfolio companies, and in looking for new transactions,” says Luke Johnson, Chairman of Risk Capital Partners. “We firmly believe in backing our management teams in their growth plans. And we think our willingness to make minority investments – as well as pure buyouts – is particularly well suited to the current environment.”

Johnson’s confidence follows the October bolt-on acquisition of 11 sites from competitor Tootsies for portfolio restaurant business Giraffe. This latest deal sees Giraffe operating 41 branches – up from the seven Giraffe sites at the time of RCP’s initial investment in 2004. Giraffe acquired the 11 sites from administrator BDO, saving 275 jobs.

“Giraffe has proved resilient despite tough economic conditions, and we are delighted to help Russel Joffe and his team at Giraffe grow the business by opportunistically acquiring some great sites,” says Ben Redmond, the RCP Partner who led the final negotiations for Giraffe.

The Giraffe transaction is the third recent bolt-on acquisition for an RCP portfolio company – following on from:

Seafood Holdings’ acquisition of Openshaws in August 2009. This is the seventh bolt on for Seafood Holdings while RCP have been shareholders alongside founder Toby Baxendale. This acquisition strengthens the Seafood Holdings distribution platform in the North West of England and Birmingham, taking EBITDA to over £7 million on sales of over £90 million.

Patisserie Holdings’ acquisition of Baker & Spice, the London-based upmarket deli/bakery bought from administrators in March 2009. Chief Executive Paul May now runs over 70 units (including brands Patisserie Valerie and Druckers) compared with eight at the time of acquisition in 2006.

RCP’s recent acquisitions follow the £75 million closing of its first institutional fund earlier this year. This is aimed at taking advantage of the squeeze in available bank funding and other forms of credit, and resultant economic slowdown.

“We are looking to back ambitious managers who want to expand their companies, through a mix of traditional buyouts and development capital transactions,” says Johnson. “RCP likes to invest £3 million to £10 million in each new partnership.”