About the company
K2 is one of the largest Managing General Agent (MGA) platforms in the USA, providing insurance carriers with distribution, underwriting and claims management services for specialty insurance lines. The company underwrites c.US$ 1.4bn of premiums across more than 24 different programmes.
Investment rationale
As one of the largest MGA platforms in the USA specialty insurance market, K2 is well-positioned to capitalise on the highly fragmented market opportunity.
K2 has delivered historically strong underwriting results that materially outperform the industry average, which is critical for retaining existing carrier relationships and expanding into new ones.
Strong value proposition across the specialty insurance spectrum from broker to carrier; the higher-returning lines they underwrite are difficult for traditional insurers to access profitably on their own.
Attractive financial profile characterised by high recurring revenues, strong free cash flow, and virtually no balance sheet risk.
Our relationship
Pantheon is a primary investor in a number of Lee Equity Partners funds and has also previously co-invested alongside the private equity manager.
Active management and value creation
Lee Equity Partners bolstered the management team with key senior hires to support the growth of the business. This included a new President, Chief Claims Officer, Chief Actuary and Financial Controller.
K2 completed 20 acquisitions, start-ups and “team lift-outs” in order to expand into new specialty lines and geographies.
The company drove carrier partner expansion to diversify its sources of capacity and helped to add new strategic distribution partnerships.
Lee Equity Partners worked with management to implement a number of operating best practices including:
- more formalised reporting,
- refinement of key performance indicators (KPIs) for the business, and
- leveraging centralised support services across the platform to achieve efficiencies.
Lee Equity Partners’ active management in tandem with management’s execution resulted in an annualised growth rate of 22% in revenues and 24% in EBITDA through a combination of organic growth and strategic M&A.
Value creation bridge
Exit
In May 2023, Warburg Pincus acquired K2 Insurance Services from Lee Equity Partners. The sale generated returns of 3.9x on cash and a 51.2% IRR.
About the company
Medifox is a leading provider of software solutions to over 16,000 outpatient care services, elderly care homes, therapist practices, youth care institutions and non-professional caregivers in Germany. The business supports care providers with key challenges including resource and route planning, care documentation, regulatory compliance and quality assurance of services provided, as well as invoicing systems. Medifox is characterised by a leading position in a fragmented sector, a robust financial profile, a highly competent management team and a “mission-critical” product. The company is headquartered in Hildesheim, Germany and employs over 500 people across six locations.
Investment rationale
- Medifox is a highly attractive business with a fragmented small and medium-sized business (“SMB”) customer base, a high retention and mission-critical, regulatory-driven product that is used daily.
- Medifox is benefiting from fundamental trends of integrated care, an ageing population and digitialisation driving underlying growth for the coming decades.
- Further growth is expected in the core outpatient segment, with tangible mergers and acquisition opportunities to further gain sector share in newer therapy and in-patient segments.
- Opportunities to make operational improvements led by a strong management team and operators.
Our relationship
Pantheon has been a longstanding investor with the manager having backed several mid-cap Hg Capital (“Hg”) funds since 2006. In addition, Pantheon holds advisory board seats for all of the Hg funds that it is invested in.
Active management and value creation
Medifox has grown substantially as a result of several of Hg’s initiatives since 2018, including:
- Achieving annualised organic revenue growth of over 10% via new customer wins and delivering adjacent functionality. This resulted in annualised revenue growth which was over 30% better than the peer average.
- Driving product and service innovation for the customers via the largest dedicated elderly care software research and development team in Germany (e.g. the new next-generation cloud-ready elderly care product).
- Driving digitalisation of sales and investing in systems landscape to deliver strong incremental margins, expanding EBITDA margins over time.
- Building a repeatable mergers and acquisition platform, with the execution and integration of nine acquisitions, including DAN Produkte.
Exit
Medifox was acquired by the US-listed strategic buyer, ResMed, a global leader in cloud-connected medical devices and out-of-hospital software-as-a-service (SaaS) business solutions, in a transaction valuing the business at an estimated US$1bn. PIP made a return of 4.1x on the original cost and a 40% IRR.
About the company
Marlink Group (“Marlink”) is a global leader in intelligent networks and digital solutions for business-critical remote operations.
Investment rationale
- Broadband usage in the maritime industry is expected to keep growing due to the increase in satellite capacity, demand for data and bandwidth by maritime operators and innovation of communication equipment.
- Marlink has long, established relationships with a wide portfolio of satellite operators, and is an attractive platform for integrating participants in all parts of the satellite communication distribution value chain.
- Technology, media and telecom is one of the sectors that Apax France specialises in, and it had prior knowledge of the company and a strong relationship with management.
- Opportunity for margin expansion through migration towards broadband VSAT (Very Small Aperture Terminal) solutions, economies of scale in satellite purchasing and network management, operations automation and accretive value added digital services.
Our relationship
PIP is a primary investor in two Apax France funds and Pantheon holds an advisory board seat for three of its funds. In addition, PIP has previously co-invested alongside the manager.
Active management and value creation
- Seven acquisitions completed until partial sale in June 2022. One additional acquisition conducted in September 2022.
- Marlink has become a world leader in maritime and enterprise satellite communication services and has over 12,000 vessels under contract of which over 7,000 (under 2,000 at entry) are vessels that have broadband installed.
- Repositioning and scale of the Land division (from negative EBITDA at entry to c.US$30m in 2022).
- Expansion of the digital offering across Marlink’s subscriber base through value added and managed services (eg, cyber, Internet of Things).
Exit
Marlink was acquired by Providence Equity Partners in June 2022, providing a partial exit for Apax France funds and PIP at a 2.5x Multiple of Invested Cost (MOIC).
About the company
MiQ is a data analytics company serving the programmatic advertising market. Through its proprietary platform, MiQ processes and connects large sets of diverse data and converts the data into customer insights. The business then uses those insights to build specific audiences, providing its clients with a strong return on investment for their digital advertising spend.
Investment rationale
- Consistent exceptional growth with digital display advertising growing at 20% p.a. over two years.
- MiQ has a proven track record of expanding into new territories, launching eight new offices in six years, all of which became profitable quickly.
- Strong barriers to entry through the proprietary platform developed by the business, as well as long-term relationships with all of the large tier-one agencies who control c.70% of media spend globally.
- Significant geographic diversity with revenues spread across the UK, North America, Europe and Australia and with scope for further expansion into other international geographies.
- MiQ generates a superior return on investment, compared to its competitors, as a result of its high performance-focused culture.
Our relationship
PIP is a primary investor in two ECI Partners funds and Pantheon has held an advisory board seat in the last six of its funds.
Active management and value creation
- Organic growth of 27% and 31% CAGR in terms of revenue and EBITDA over the five-year holding period.
- Developed and executed a North American and Asian expansion strategy, leading to four new US offices and an increase in North American revenue to over 80% of total group revenue upon exit.
- Client direct customers that now account for 15% of revenue versus none at entry.
- Hired a new management layer beneath the founders enabling the business to scale up in key markets.
Exit
MiQ was acquired by Bridgepoint Advisers in September 2022, providing a full exit for ECI and for PIP at a 5.9x Multiple of Invested Cost (MOIC) and 49% IRR. The uplift versus the valuation 12 months prior was 296%.
About the company
Biolchim specialises in the production and commercialisation of bio-stimulants and specialty fertilisers. These enable farmers to improve the quantity and quality of their crops while using less water and chemical fertilisers.
Investment rationale
- Biolchim is a producer of environmentally-friendly bio-stimulants, made mostly from raw materials of natural origin.
- Potential to improve product mix and focus on highly specialised products.
- Opportunity for further international expansion, both organically and through acquisitions.
Our relationship
PIP is a primary investor in three Chequers Capital funds and Pantheon holds an advisory board seat for each fund. In addition, PIP has previously co-invested alongside Chequers Capital.
Active management and value creation
- Increased the quality of the business by improving the efficacy of the products, building a larger portfolio, strong research and development, and better financial performance.
- Increased awareness among fertiliser manufacturers of the need to offer greener products.
- International expansion to over 50 countries with production facilities in Europe and South America.
- Strong performance across subsidiaries in China, Brazil, Hungary and Italy.
- Pricing power, with the ability to re-price products and services in an inflationary environment.
- Successful management of the operations and supply chain resulting in EBITDA, growth including during a period of increasing raw materials prices and energy costs.
- Biolchim achieved a three-year earnings revenue CAGR of 8% and three-year earnings CAGR of 14%.
- A large strategic multiple uplift accounts for most of the value creation and was achieved through positioning the company to be an attractive acquisition target for a large trade buyer.
Exit
Biolchim was acquired by US strategic corporation buyer, J.M. Huber, in November 2022 after a competitive selling process with several trade buyers took place. This provided a full exit for Chequers Capital and for PIP at a Multiple of Invested Cost (MOIC) of 4.2x and IRR of 36%. The uplift versus the December 2021 valuation was 40%.
About the company
Travel Chapter is a technology-enabled travel platform for self-catering holidays. Its headquarters are in Devon in the UK with a talented team of highly expert people and its leading brand, holidaycottages.co.uk, specialises in holidays across England, Scotland and Wales.
Investment rationale
- Acquisition of a leading UK holiday cottage platform with a strong track record of organic growth (new and repeat bookings, revenue and EBITDA growth c. 30% at entry).
- Deep immediate pipeline of M&A opportunities already identified at entry, with management having a demonstrated track record of successful bolt-on acquisitions.
- Large addressable market with sustainable tailwinds with proven resilience through economic cycles.
- ECI Partners (“ECI”) was able to gain preferential access to the opportunity as a result of a 20+ year track record in the travel sector and a 15-year relationship with the management team.
Our relationship
- PIP is a primary investor in four ECI funds and Pantheon holds an advisory board seat in each fund.
Active management and value creation
- Seven bolt-on acquisitions between February 2019 and December 2021, significantly expanding the geographic footprint and property base of the business.
- Executed the largest transaction to date of “Sally’s Cottages”, adding 500+ properties in the Lake District.
- Supported the business with organic property growth, resulting in a significant uptick in sign-ups (1,502 in 2021 vs. 1,024 in 2019).
- Helped develop the technology team and a data team that implemented several data improvement projects.
- The business traded strongly through COVID-19, with annual revenue and EBITDA growth of 38% and 50% over the three-year investment period.
Exit
- Travel Chapter was acquired by Intermediate Capital Group in December 2021, providing an exit for ECI and for PIP and generating a 2.6 times cost multiple and 36% annual return over three years.
About the company
Ports America is the largest terminal operator and stevedore (loading and unloading of ships) in North America, handling c.26% of US container throughput. The company provides terminal management and a full range of stevedoring and labour services at more than 70 locations in over 33 ports.
Investment rationale
- Diversified portfolio of port terminals based across all major ports in the USA with a presence on all three coastlines: the Atlantic, the Pacific and the Gulf coasts.
- Attractive valuation entry point that was lower than both the long-term sector average and single terminal transaction multiples at the time.
Our relationship
- Pantheon has a long-standing relationship with the private equity manager and has evaluated multiple secondary opportunities with Oaktree Capital Management (“OCM”).
- Pantheon also holds an advisory board seat with OCM.
Active management and value creation
- The new management team that was implemented by OCM has been actively involved in transforming the business from a low-margin stevedoring provider to a higher margin container terminal operator with long-term contracts. The management team was supported by experienced professionals from OCM and was responsible for undertaking transformational acquisitions, removing redundancies and building a network of contracts to ensure stable cash flows.
- During the investment period, EBITDA margin expansion from 12% to 23% was achieved through:
- Cost savings through reductions in back office and support services.
- Exit of low margin sites.
- Optimisation of terminal layouts and expansion of terminal capacities.
Exit
- Ports America was acquired by the Canada Pension Plan Investment Board in November 2021, providing a full exit for OCM and for PIP.
About the company
Headquartered in the UK, EUSA Pharma is a global, specialty in-licensing pharmaceutical company focused on oncology and rare diseases.
Investment rationale
- Established business infrastructure including a sales and marketing network, and a product portfolio and management team which EW Healthcare (“EW”) could leverage to grow the licensing platform.
- Pipeline of potential acquisition and licensing opportunities in Europe and the US targeting companies offering complementary products and distribution networks.
- EW’s prior experience in working with EUSA Pharma’s founder who had successfully built and grown two specialty pharmaceutical platforms alongside private equity deal sponsors.
- The credentials of EW which is one of the longest-established healthcare-focused growth equity and buyout specialist private equity firms in the world, having invested in over 150 companies to date.
Key products
- Qarziba: For the treatment of paediatric neuroblastoma. Neuroblastoma is a rare cancerous tumour that begins in the nerve tissue of infants and very young children. About 49% of neuroblastoma patients are in the high-risk category, meaning they have the greatest likelihood of relapse during treatment.
- Fotivda: For the treatment of renal cell carcinoma. Renal carcinoma is the most common form of kidney cancer and usually affects adults aged in their 60s and 70s.
- Sylvant: For the treatment of Multicentric Castleman’s disease (lymph node disorder). It is a rare disease that affects lymph nodes and other immune cell structures in the body and can severely weaken the immune system.
- Caphosol: For the treatment of oral mucositis. It is an inflammation of the mucosa lining around the mouth, and is one of the most common complications arising from chemo- and radiotherapies in cancer treatments.
Our relationship
Pantheon has a well-established relationship with EW Healthcare dating back to 2004. Pantheon holds an advisory board seat on the four most recent EW funds, and PIP is an investor in each of those funds.
Exit
EUSA Pharma was acquired by Italian pharmaceutical company Recordati in December 2021, providing a full exit for EW and for PIP. The overall return to PIP is c.5.0x of invested cost with the vast majority of the distributions already received during the financial year.
About the company
Affinity Education Group (“Affinity”) provides educational services and care, including daycare, before- and after-school care and occasional care for children through the ownership and management of its childcare centres in Australia. Affinity’s portfolio consists of over 150 daycare centres throughout Australia, supporting more than 15,000 children. More than 50% of Affinity’s revenue is derived from the Australian federal government, under its child benefit rebate scheme.
Investment Rationale
- As the third largest player in the Australian childcare market, Affinity enjoys brand presence and a geographic footprint which captures a core clientele.
- Supply/demand imbalance in the daycare market has resulted in attractive pricing for Affinity’s services.
- Increased funding availability from the Australian Government for childcare provision to support market growth.
- Anchorage Capital Partners (“Anchorage”) had a pipeline of 11 centres targeted for acquisition and were looking to reduce costs through the divestment of 15-20 underperforming centres.
- Anchorage engaged with Affinity management on ESG issues during the due diligence process and the company has satisfied requirements for all aspects including its employee approval systems, adherence to childcare regulations, absence of litigation and its employee assistance and whistle blower programmes.
Active management and value creation
Anchorage developed a comprehensive performance improvement programme to leverage the full potential of Affinity’s portfolio of early education long daycare centres. This included:
- Installation of a new leadership team and implementation of standardised systems and processes;
- Portfolio optimisation through the upgrade of centres and divestment of poor performers;
- Increased focus on delivering curriculum activities, and
- Refined marketing approach to capitalise on growing business momentum and word-of-mouth recommendations.
Exit
Affinity Education Group was acquired by Quadrant Private Equity in September 2021, providing a full exit for Anchorage and for PIP.
About the company
Mobilitie develops and operates networks and infrastructure that wireless carriers rely upon to provide coverage for their customers. The company primarily focuses on installing indoor and outdoor distributed antenna systems (“DAS”) and Wi-Fi networks in venues with high footfall such as sports stadiums, convention centres, casinos, hospitals, shopping malls, hotels, college campuses and entertainment venues.
Investment Rationale
- Increasing network demand both in the number of wireless users and the data usage of wireless interactions.
- Proven management team with long-term relationships with all major wireless carriers.
- Long-term contracted revenue streams.
Our relationship
Pantheon has a well-established relationship with Shamrock Capital Advisors (“Shamrock”) dating back to 2012. PIP is a primary investor in two Shamrock funds and has participated in three co-investments alongside the manager.
Active management and value creation
During the investment period, the Mobilitie asset portfolio expanded to include:
- 118 DAS networks;
- 10 Wi-Fi networks; and
- 290 towers.
Additionally, in September 2020, Mobilitie signed a strategically important agreement with the San Francisco Bay Area Rapid Transit District, the nation’s fifth busiest public transportation system by ridership, to provide a complete DAS, Wi-Fi and fibre network services platform.
Exit
Mobilitie was acquired by BAI Communications in September 2021, providing a full exit for Shamrock and for PIP.