Peter Peacock

This is exactly what we hear from the VCs that we back. In the UK, there is no shortage of capital for world-class founders. There is a shortage of world-class founders. We need to create the conditions where the very best founders choose the UK as the place to build their companies. If we do this, then the capital will follow. Strong-arming UK pension funds to invest in UK VC funds or, even worse, directly into UK companies, is not the answer. For a more detailed view on this, please see the white paper we published last year on the Mansion House initiative. https://lnkd.in/e86HSxrY

44

11 Comments

Major Barloworld shareholder rejects R120 offer, demands R130! Silchester says consortium’s offer is undervalued. UK-based SILCHESTER INTERNATIONAL INVESTORS LLP, a major investor in JSE-listed Barloworld, does not believe the offer from the consortium that is proposing to buy out all the ordinary shares in the JSE-listed group is “compelling”. A firm offer by the consortium last week values Barloworld at R23 billion and comprises a cash offer of R120 per share that will not be reduced by the R3.10 per share dividend already declared by Barloworld on 22 November. However, Silchester director Tim Linehan said the firm is unwilling to tender its Barloworld shares unless the consortium offers at least R130 per share. Linehan said a full privatisation of Barloworld is unlikely to succeed without the support of the group’s primary shareholders, including Silchester. Silchester owns 33 531 795 ordinary shares in Barloworld, which represents 17.7% of Barloworld’s issued share capital. The consortium comprises Entsha and Gulf Falcon Holding Limited, a wholly-owned subsidiary of the Zahid Group, a multidisciplinary conglomerate headquartered in Saudi Arabia and an effective 18.9% shareholder in Barloworld. Entsha is a newly incorporated company that is ultimately owned by The Katlego Le Masego Trust, an inter vivos trust established for the benefit of Barloworld CEO Dominic Sewela and his family. The scheme of arrangement requires the support of 75% of eligible voters who participate in the meeting – in their own capacity or by proxy – for it to succeed. The holders of about 22.92% or 43 367 048 of Barloworld’s shares are not eligible to vote on the proposed transaction. These excluded shares are those held by the Zahid Group (35 834 624), Barloworld Foundation (6 578 121), Dominic Sewela (653 207) and Katkego Le Masego Trust (401 096). Lineham said Silchester intends to exercise all rights available to shareholders in South Africa to protect the financial interests of Silchester’s clients. https://lnkd.in/dfqbFvix

5

Recent M&A market performance is showing significant signs of recovery from the lows of H2 2023, with the growth in PE and PE-backed deals leading the charge.

8

The British Business Bank produced a great report last week on the performance of UK VC funds (link in comments) over the last 20+ years. As with all reports like this, it's really important to dig into the detail and not just rely on the headlines. In particular, I was keen to compare the performance of the best UK funds to those in the US. While accepting the limitations of the data (all performance data on VC is based on a very low sample size), it's still interesting to see how the UK funds in the BBB report compare to the Cambridge Associates US VC benchmarks. As you can see from the chart below, the top quartile benchmark for UK funds exceeded the US funds for the period 2002-2007. But the sample size for UK funds in this period is particularly low (eg just five funds for the 2004/05 period). Since 2008, the top quartile UK funds have underperformed the US benchmark, and since 2010 are much closer to the US median return than the upper quartile. There are some outstanding founders and companies in the UK and some strong-performing VC funds. But the reality of VC is that performance is driven by a small number of outlier investments. Without these, it's almost impossible to deliver 3x net returns to LPs. For the UK to really become competitive with the US, we need to see more UK-based companies able to scale and exit at valuations in excess of $5bn. Unfortunately, there are no easy solutions to achieving this. We consistently hear from our VC managers that there is no shortage of capital for the best UK companies. Where there is a shortage is in the number of world-class founders looking to build in the UK. Get this right and the capital (and returns) will follow.

37

3 Comments

#Hargreaves_Lansdown Hargreaves Lansdown backed the £5.4 billion bid for the FTSE 100 fund manager today from a private equity consortium, a deal that will end its time as a listed company. The Bristol-based finance firm has been listed in London since 2007. It said today that the final offer valued its shares at 1140p in cash and would include a 30p per share dividend for the financial year which ended on 30 June. Compared to the Hargreaves Lansdown share price before the approach was first made in April, the price is at a premium of over 54%. The consortium is made up of CVC, Nordic Capital and ADIA. Hargreaves Lansdown is named after its founders – Peter Hargreaves and Stephen Lansdown – who set it up as an investment tip sheet. It now runs a state-of-the-art trading platform from which clients can run their own portfolios and pensions. https://lnkd.in/dKpizupy

4

A friend of mine sent me this article on the decline of the UK (public equity) market's size and ownership and it's implications (not great if the UK misses out on financing wealth creating life sciences companies created in the UK). Over 20 years ago we took a conscious decision to globalise client portfolios primarily due to the higher growth investment opportunities available overseas (in US markets in particular) where exposure to similar growth companies was not available in the UK. It was undoubtedly the right thing to do from an investment perspective but the lack of new growth listings in the UK feels a bit "chicken and egg". Whether it is due to lack of risk appetite or available capital, it could well hand a significant prize to overseas capital markets particularly in life sciences as highlighted in the article. The reasons are many and manifold, ranging from closed defined benefit pension schemes with underlying risk aversion to a consistently weak domestic currency (twin fiscal and capital account deficits) . Serious UK politicians would be giving this some proper thought but if the leaks/previews of the forthcoming budget are to be believed, the UK is headed in the other direction. My job is to seek the best global risk adjusted returns for our clients and to that end, a deeper pool of UK opportunities would be welcome but as the article highlights, it is more.of a diminishing pool under current trends. https://lnkd.in/eeKqZdxQ /0ur-biggest-problem-hiding-in-plain-sight

15

Caveat Emptor/Caveat Venditor Interesting 'reported' development with the putative sale of The Hundred by Elizabeth ammon in The Times yesterday. This follows some exaggerated/sensationalist commentary and financial information publicly shared by Lalit Modi over the last months. Over the coming weeks, as author of The Financial Review of ECB Finances in April 2023, I will write more fully on the many factors surrounding the sale of The Hundred. This is the first of many updates. What is clear is that Dwayne Spradlin’s Harvard Business Review (“Are you Solving the Right Problem?” September 2012) is as relevant to the game’s current governing body - the England and Wales Cricket Board ('ECB') - as it is to a bog-standard widget factory. Spradlin observes that “most companies aren’t sufficiently rigorous in defining the problem they’re attempting to solve and articulating why those issues are important”. Spradlin challenges the decisions taken, and how in hindsight alternative routes should have been made, or even that a decision once made, can concerningly address the wrong problem. The key, he eruditely highlights, stems from asking the right questions at the start so that the right problem is ultimately tackled. Which begs the question, who asks the right questions and scrutinises decisions made by the ECB and is the right problem ultimately being tackled? Cricket in the UK, at the county and recreational level, is essentially run by well-intentioned, heavily-overworked and stretched volunteer boards, which are transitory in nature and comply in general with Sport England best practice. Whilst ensuring freshness of tenure, there remains limited corporate memory for stakeholders, or owners of the ECB, to appropriately challenge and review how the ECB is operating and above all else for whom and indeed why historic and future decisions are made. So, in reality, probably no one at county, recreational, national or political level properly challenges and scrutinises what the ECB does, and no one who will be around to deal with the consequences of its actions. Vikram Banerjee, the ECB’s director of business operations in The Guardian on 30th May 2024 was quoted as saying the aim in the potential sale is “to seek partners with expertise to help us take the competition to the next level, while ensuring any investment benefits the whole game” alongside the chance “to engage new global strategic partners to help us unlock the future potential of the Hundred”.   This appears a potentially honest acceptance that the ECB, despite significant internal spend over the last decade, doesn’t have sufficient in-house expertise to create value. Hence the desire for other partners to invest now to share in future value creation and also providing near term salvation/liquidity for many cash strapped counties. I'll explore many financial and strategic factors from a buyers' and sellers' perspective. More to follow. #TheHundred #cricket #economicsofsport

21

11 Comments

We’ve had some fantastic conversations in the last week with CEOs in the hedge fund space. Key things we have been discussing and some challenges CEOs will face in January. Performance reporting & IR. Youl need to complete all performance and year end reporting, if you are under a certain level of AUM it may be worth utilising contractors for this type of work when the workload piles on. Extensive meetings with investors, they will be accessing whether to increase, decrease or or withdraw capital based on last years performance. It’s important to paint the story of the last 12 months have real time data and don’t BS if you want to retain. This is where a stellar Head of IR or IR team will come into its own. If you need help to find someone you know where to come (my DMs) Allocation and fundraising time. Some investors may take advantage of liquidity windows or some may redeem to allocate elsewhere. Your going to need to be pitching, pitching, oh and pitching more. Demonstrate value above all of the noise. It’s also time to rebalance the portfolio. Boring but key tasks this month will be audit prep and staying ahead of the curve on new regulation in digital assets. Last piece, which really should be done by now but your not going to generate returns without the talent to produce them. Talent management is absolutely vital. Where are the gaps? What strategies should you deploy this year? What’s your current comp like? What has your attrition been this year? CJR Staffing - Digital Assets can help with all of this.

3

2 Comments

Anoop - I agree with you - preparation is key to getting a #deal done and if the preparation focusses on data then that definitely helps buyers. #PrivateEquity and businesses they back are particularly keen to see the data supporting the growth story for the business. CP Deals works with businesses, frequently alongside Anoop and his team, to find the right #buyers and #investors and we know that having great systems in place is an important factor in a successful deal.

15

Interesting thoughts from Houlihan on Direct PE (and the maturation of the market around independent sponsors) - "global volume (will) rise from $6 billion in 2019 to an estimated $50 billion this year, with annual deal numbers tripling over that period. We’ll see over 780 transactions this year... Directs have the promise to account for half of all annual capital raised for private equity in 10–15 years." #privateequity #independentsponsors

22

This post (image below) highlights the positive track record of UK managed VC funds in delivering good returns to investors. According to the British Private Equity & Venture Capital Association (BVCA) Performance Measurement Survey, in collaboration with PwC, UK managed VC funds have collectively achieved an impressive internal rate of return (IRR) of 11.2% per annum. This data underscores the potential for solid returns for investors engaging in these funds. Thank you to my ex-colleagues at the BVCA for compiling these amazing statistics - the full report can be seen here: https://lnkd.in/eF2RRKrP 👏 👏 👏

25

1 Comment

Fourth exit so far this year for Wealth Club A large US pharmaceutical company has acquired clinical trials platform Atom5™ developed by Aparito – marking the fourth exit so far this year for Wealth Club and provides our investors with average return of c 3x 26% IRR before tax relief. Wrexham-based Aparito has developed the Atom5™ software platform and app that efficiently address several problems that traditionally plague clinical trials – namely poor patient experience leading to high patient drop-out rates, patchy data, and escalating time-and-costs to completion. Patients input their own data in the app – such as medication times and dosage, and how they feel and function. Clinicians can see and speak to the patient via secure video conference, and the platform can conduct a wide range of reporting and data analysis. The technology can also generate real-time warnings if it suspects adverse events or an unexpected deterioration in the patient. Aparito’s Atom5™ platform technology already supports clinical trials in 18 languages across more than 20 countries. We extend our congratulations to founder Elin Haf Davies and her team Visit our website for information on other exits, current portfolio and investment opportunities https://lnkd.in/djAMpxY9 Wealth Club

89

11 Comments

Mergers of UK investment trusts make sense to build scale and efficiencies which should result in lower fees for investors. This is natural given the performance trends and shift to lower cost index-based products. One “benefit” that you rarely see mentioned during these announcements is that by combining, you can merge away the performance history of underperforming managers. While Alliance Trust has outperformed its benchmark on a 1,3 and 5 year basis on both a NAV and share price basis (including its use of leverage vs an unleveraged benchmark) as of May, Witan has underperformed over the same time periods. Any guess which will be the surviving performance history? Elliot Gulliver-Needham #indexinvesting

15

The inflow of British cash into equity funds last month was the thirteenth highest on record. UK investors shrugged off faltering #equity #markets and the sagging #bond market in April and continued to add strongly to their fund holdings, according to the latest Fund Flow Index from Calastone, the largest global funds network. They added a net £1.93bn to #equityfunds and £422m to #fixedincome funds. Meanwhile, mixed asset funds enjoyed their first month of inflows after eleven consecutive months of net selling. #Indexfunds are the main beneficiary of investor capital at present. Fund flows have strongly favoured them now for 16 consecutive months. Since January 2023, equity index funds (led by North American and Global funds) have taken in £14.92bn of investor cash, while active funds have shed £7.26bn. Money market funds suffered an outflow of £100m in April, the first month this asset class has seen net selling since January 2023. Investors are switching outright from safe-haven money-market funds, despite ongoing high yields, into riskier asset classes. Property funds, which face cyclical and structural problems, saw continued outflows too. Angus Hume Lane Clark Siobhan Whelan Rupert Forrest Angus Hunter Smart Tom Norton Sam Mehew Rupert Clark

16

1 Comment

Lots of helpful (and quite profound) insights from Brendan O'Neill at spiked LTD in this article but the one that caught my attention was in his concluding comments which the following quote captures well. "Let’s be honest about what is going on here: yesterday’s gatekeepers of thought and opinion are incensed that the internet age has chipped away at their old-world authority. They cannot believe they no longer enjoy a monopoly of information and ideas...............The new clerisy might be secular and woke, rather than godly and conservative, but it shares with its forebears a feverish anxiety over the liberty to speak. It isn’t Musk they fear so much as what he has facilitated – a world in which one can speak even when one’s ideas offend the ruling class." Many of the traditional mainstream media outlets (and academic institutions) are losing their audiences in tandem with their credibility. The "unstoppable rise of 'unmediated' media" certainly has put their noses out of joint and as Brendan O'Neill quite rightly says 'That there exists a popular publishing platform that is beyond the reach of both their moral judgement and their punitive interventions shakes them to their core.' The increasing utilisation and audience of the unmediated media speaks volumes. It is well time that the mainstream journalists start to look, listen, investigate and report with a less wokish and elitist mindset. The Hon. Peter Dutton MP Nick Cater The Australian Financial Review https://lnkd.in/gCpvwSZM

25

1 Comment

The recent drop in UK gilts tells us that foreign investors who buy most of our government debt think that UK Plc is too risky, unproductive, unattractive facing structural challenges that our government was incapable of addressing. Labour had 14 years in opposition to work out a new plan for socially progressive economic plan with a hard headed approach to public policy reform. Instead, Rachel Reeves gave us a growth-free budget, which left her just £9.9 billion of headroom against her fiscal rules despite raising £40 billion in new taxes. Worse, with an interest bill of £100 billion-plus a year to service, rising gilt yields have wiped out the headroom. So, her promise to never raise taxes again turns out now to be highly spurious. Expect, therefore, “emergency taxes” to address “unprecedented” market pressures that cause inflation to rise and borrowing costs increase. We need wide spread public sector reform, a smaller state, less generous benefits and a more benign approach to needs of SMEs in all sectors.

256

85 Comments

TDR To Become Asda’s Majority Owner After Agreeing To Buy Zuber’s Stake It has been confirmed today that private equity firm TDR Capital will acquire Zuber Issa’s shares in Asda. His brother Mohsin will remain a co-owner of the supermarket they bought along with TDR in 2021. Set to be completed Q3 2024. TDR will then own 67.5% of Asda, Mohsin (22.5%) and Walmart (10%). The transaction further dismantles the business relationship between Zuber and Mohsin, at a time when Asda is losing market share. Mohsin denied rumours of a fallout with his brother, saying on the BBC that the pair “get on exceptionally well”. Commenting on today’s news, Gary Lindsay and Tom Mitchell, Managing Partners of TDR Capital, said: “By combining our investment and sector expertise with Asda’s heritage of delivering value for customers, we have already made significant progress in transforming Asda … As majority owners, we will continue to work closely with the Asda management team and colleagues across the business to support the ambitious strategy, which we believe is the right one to continue to move Asda forward.” Asda’s Chairman, Stuart Rose, commented: “On behalf of the Board, I welcome TDR’s increased investment in Asda – which is a clear sign of its commitment to the business … The Board and shareholders continue to put in place the building blocks to position Asda for long-term success, and that is good news for colleagues, customers, suppliers and other business partners.” Meanwhile, Mohsin said: “Today’s announcement further underlines my own and TDR’s confidence both in Asda and the UK consumer market. As a shareholder group, we are excited about the growth journey we are on … I also want to add my personal support and best wishes for Zuber’s plans as we continue our successful family partnership, working as partners on our personal co-investments, family office philanthropy and Issa Foundation projects.” Zuber concluded: “With the divestment of my Asda shares, I will now turn my attention towards leading and managing the remaining EG UK forecourt sites that I have personally acquired, and spend more time on my charitable endeavours. I am pleased to see TDR increasing its investment in Asda. With Mohsin and TDR’s ongoing focus and shareholding, I am confident that Asda will achieve its growth ambitions.” NamNews Implications: * This means more of a PE influence on how Asda is run… * i.e. see The Implications of Private Equity Takeover of a Mult (Link in comments below) * And why not reassess your retailer handling by business model? – See Tailoring Major Customer Management by Business Model (Vive la Difference?) (Link in comments below) #PrivateEquity

16

4 Comments

BlackRock's purchase of Preqin could be one of the best and the most significant realised returns on investment for a private UK firm. Having raised only around £3.3 million in equity since Preqin was founded in 2002, the purchase price of £2.55 billion reflects a return of around 772 times on investment. Whilst the VC world is preoccupied in beating the drum about how much their portfolio companies raise, serving as a badge of honour and validation of perceived investment success, this purchase shows that it is possible to build a successful company with a modest equity investment and without multiple dilutive equity rounds. It also shows that it takes time and patience to build a successful company, taking Preqin's equity investors two decades to realise their exit. Additionally, Preqin’s purchase price is around 4 times the market cap of the UK’s largest listed VC firm.

14

1 Comment