Private equity backing accelerates growth plans

As one of the most significant private equity deals in the region in the last few years, Fine Industries’ management buyout highlighted the fact that, after having all but vanished from the North East a couple of years ago, private equity is making a welcome return. Many sectors are more active due to consolidation and private equity houses are becoming active participants in the merger and acquisition (M&A) market alongside trade players.

In November last year, we advised the shareholders of Fine Industries Ltd on its management buyout, backed by a £25.5 million investment from private equity firm NorthEdge Capital.

Fine Industries has grown significantly since the original buyout in 2008, achieving a turnover of £40 million in 2013 and employing around 270 staff.  It is a contract manufacturer of bespoke high quality fine chemicals for use in the crop protection, pharmaceutical and speciality chemicals markets. The group also includes hazardous waste incineration, contract research and development and facilities management operations and exports to countries including Switzerland, Germany, USA, Brazil and Ireland.

We’ve seen a real surge in private equity activity in the last 12 months and strong assets are being hotly contested in competitive processes. Private equity houses are demonstrating that, not only is capital available for both initial and follow on investment, but they can also provide valuable operational and strategic support to ambitious companies looking to expand their operations.

There are options available to businesses facing the challenge of securing investment for their existing operations and in support of acquisitions as part of a wider growth strategy. While debt funding is generally lower cost than equity, debt providers are much less flexible with regard to financial structures. In addition to providing funding, private equity houses will also add value to a business by providing operational support and access to experienced business leaders relevant to the specific industry. For these reasons many transactions are structured with a mix of debt and equity funding.

Fine Industries was acquired by its management team and North Edge exactly five years after the company was established in a management buyout led by former CEO Keith Hanson. The original buyout saw the Seal Sands operation of Evonik Industries AG acquired by the company along with all assets, employees and ongoing operations. It then continued to supply products to Evonik on a custom manufacturing basis.

Craig Morgan, who was part of the original buyout team and also led the latest buyout, takes over the role of group managing director. In terms of partnering with a private equity house he said:

“The backing from NorthEdge provides us with an even stronger platform to accelerate our growth and move our business to the next level. It’s great to be working with a team that are as committed and passionate about our future as we are. The investment will accelerate the capital expenditure programme to increase capacity and support the company’s growth ambitions.”

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Gareth Marshall | Corporate Finance Specialist
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