About the company
Vistra is a global provider of corporate and trust services.
BPEA EQT (“BPEA”) first invested in Vistra in 2015, completing a major merger with Orangefield at the time of acquisition.
The combined entity has become the third largest player globally in the corporate and trust services industry and the largest in Asia, with a broadened geographical reach a broadened geographical reach and coverage in 85 locations across 45 jurisdictions, broadly split equally between Asia and Europe.
Investment rationale
- Vistra is an asset-light business with high recurring revenues and strong cash conversion.
- At the time of acquisition, Vistra had a deep track record of acquisitions alongside robust organic growth. There was significant scope for more bolt-on acquisitions and operational improvement opportunities.
- Strong alignment with management team who also took up equity stakes in the new enlarged business.
Our relationship
Pantheon has been a long-term investor with the manager, having backed its funds on a primary and secondary basis since 2005. In addition, Pantheon has been an Advisory Board member for numerous BPEA funds.
Active management and value creation
BPEA first invested in Vistra in 2015, completing a major merger with Orangefield at the time of acquisition. This initial acquisition was followed by 21 additional bolt-ons which added $77m of incremental EBITDA at a blended average multiple of 9x Enterprise Value (EV)/EBITDA, delivering on a planned transformational Mergers and Acquisitions (M&A) strategy.
Through this M&A and organic growth, BPEA expanded Vistra’s geographical reach to the Americas, UK, and Middle East, and restructured its divisions to better service the faster-growing Alternative Investment client base.
As a result, Vistra has grown revenue and EBITDA by over 131% and 172%, respectively since 2015.
Exit
Vistra merged with Tricor in 2023, creating a business with a combined enterprise value of $6.5bn. This transaction gave existing investors, like PIP, the opportunity to exit at an attractive return of 3.4x cost multiple.
About the company
Creative Artists Agency (“CAA”) is a talent and sports agency based in Los Angeles, California.
The agency represents clients in the entertainment, media and sports sectors including thousands of the world’s leading actors, directors, athletes, musical artists and broadcasters.
The company was founded in 1975 and employs more than 3,000 people across 25 countries.
Investment rationale
- This was a compelling opportunity to invest in a top agency platform in a market that offers pure play exposure to the media and entertainment sector.
- CAA has enjoyed strong customer and agent retention historically, and has a track record of net client wins against the competition. The only capex needs of the business are leasehold improvements and IT equipment, which account for less than 2% of revenues.
- The business is asset-light with recurring revenues and strong cash conversion. Furthermore, CAA has a highly diversified and stable revenue mix.
- The company performed resiliently through the COVID-19 pandemic and regained strong momentum following the lifting of restrictions.
Our relationship
TPG was founded in 1993 and is a high-quality US buyout manager with whom Pantheon has a long-standing relationship.
Active management and value creation
- TPG completed a large add-on acquisition to CAA by acquiring ICM Partners in September 2021 for a total consideration of US$750m. The combination of CAA and ICM has created a larger platform with access to a global clientele of artists in film, television, music and other entertainment segments. ICM was the fourth largest talent agency prior to the acquisition, and its industry-leading publishing division complemented CAA’s content-driven motion pictures, television, and podcasting businesses, while the combination created a greater number of opportunities for their clients.
- During TPG’s ownership, the company experienced significant organic growth driven by content proliferation and acquisition of further sports rights. In addition, demand from streaming services such as Netflix, Apple TV+ and Hulu has fuelled CAA’s growth.
Exit
TPG sold CAA to Groupe Artémis, the investment company of the Paris-based Pinault family, which has a portfolio of global luxury brands in arts, fashion, publishing, sports and technology.
About the company
Syneos Health is a leading provider of outsourced clinical research and commercialisation services to pharmaceutical and biotech customers. The company serves the 25 largest pharmaceutical companies and many of the most innovative biotech companies in the world.
Investment rationale
- Large player in a fragmented space: Syneos is currently the fourth largest Contract Research Organisation (CRO) and second largest Clinical Commercialisation Organisation (CCO) in a market worth more than US$40bn, giving the company preferred access to large complex biopharma projects across blue-chip healthcare customers.
- Strong value proposition: Given the significant costs and time associated with producing a new drug and bringing it to market, the cost of failure (or delays) is very high for customers, leading to high switching costs, low price sensitivity, and high barriers to entry.
- Exposure to high-growth therapeutic segments: Strong organic revenue growth profile and backlog coverage due to focus on high-growth subsegments such as Cardiovascular, Cell & Gene Therapy, Neuroscience, Oncology, etc., which are projected to grow at > 10% cumulative annual growth rate over the next five years.
- Syneos Health was formed via the merger of two high-growth pharmaceutical services businesses (INC Research & inVentiv Health). Upon consolidation, Syneos focused primarily on revenue growth, which resulted in strong bookings year-on-year. However, the company lacked effective cost and inventory control measures to deliver its contracted backlog in a timely manner, leaving significant integration and margin improvement opportunity for a new investor.
Our relationship
Founded in New York in 1992, Veritas Capital (“Veritas”) invests in companies providing primarliy critical technology-enabled products and services to government and commercial customers worldwide.
Pantheon has a long-standing relationship with Veritas, and PIP has invested in two of the manager’s funds on a primary basis. PIP is also co-invested alongside Veritas in Perspecta, a provider of services and solutions to US government agencies.
Active management and value creation
The manager sees a number of routes to create value for the business through bolstering the management team, expanding into adjacent markets and deepening the penetration of high-margin services. Veritas also intends to invest in Syneos’ leadership functions (Chief Operating Officer) to help drive effective operational improvements and complement the recent growth experienced by the company.
About the company
Qualtrics, the leader and creator of “experience management” software, is a cloud-native software provider that helps organisations quickly identify and resolve points of friction across all digital and human touchpoints in their business. These insights allow businesses to retain their best customers and employees, protect their revenue, and drive profitability. More than 19,000 organisations around the world use Qualtrics’ advanced Artificial Intelligence (“AI”) platform to improve business performance. Qualtrics houses one of the largest databases of human survey responses in the world. Qualtrics is co-headquartered in Provo, Utah and Seattle and operates out of 28 offices globally.
Investment rationale
- Qualtrics’ technology is central to how businesses make mission-critical customer and employee decisions which increase revenue and operational efficiency. With an AI-powered platform and built-in automation, companies can deliver exceptional experiences to their customers and employees, at scale.
- The business is led by a strong and experienced management team.
- Qualtrics is recognised as a leader in experience management which is a rapidly growing market.
- Qualtrics has a strong customer base, including well-known brands like Uber, Coca-Cola and Pfizer.
Our relationship
Founded in 1983, Accel is a venture capital firm, based in Palo Alto in the USA, which is dedicated to helping entrepreneurs build world-class technology-focused companies. Given its global investment mandate, Accel also has offices in other technology hubs such as Bangalore and London. Pantheon has a long-standing relationship with Accel, including active participation as an advisory board member. PIP is currently invested in three Accel funds on a primary basis.
Active management and value creation
Accel led the Series A financing round for Qualtrics in 2012. Subsequently, Accel invested substantial follow-on capital across its platform and has advised the company on initiatives such as product development, new customer acquisition, network introductions, and talent management. Accel’s partnership as an active board member and investor helped enable a sale to SAP and ultimately an initial public offering in January 2021, at a valuation of US$15.1bn.
In 2023, Accel identified Qualtrics as a compelling investment opportunity due to a dislocation in the public stock price. Accel partnered with Silver Lake and Canada Pension Plan Investment Board (“CPPIB”) to purchase the business for approximately US$12.5bn. Accel’s intimate knowledge of the business and ongoing close relationship with the management team makes it a preferred partner to help Qualtrics maintain its market-leading position and continue product innovation.
About the company
Apex Service Partners (“Apex”) is a provider of HVAC (Heating, Ventilation, Air Conditioning), plumbing and electrical services. Founded in 2019, the business operates across the USA and has over 8,000 employees.
Investment rationale
- Apex operates in a sector that has proven to be resilient through economic cycles as it provides mission-critical services that often cannot be delayed.
- The HVAC market is growing strongly and is benefitting from an increasing number of households, ageing housing stock, increasing energy efficiency requirements and more extreme weather patterns.
- Apex operates in a highly fragmented market that the manager believes is ripe for consolidation. The vast majority of competitors are smaller, independent providers that lack the scale required to grow in this market.
Our relationship
Alpine Investors (“Alpine”) is a top-performing, US-based private equity manager that focuses on the mid-market. PIP has previously invested alongside Alpine in TEAM Services Group, which was a manager-led secondary transaction.
Active management and value creation
Alpine first invested in Apex in 2019 and has grown the company significantly through M&A during the first phase of its ownership. Apex’s internal M&A team has developed a successful M&A playbook that provides acquired businesses with a significant uplift to EBITDA one year after acquisition. The M&A strategy is likely to result in accretive acquisitions, which is expected to drive value over the course of Alpine’s next phase of ownership.
About the company
Medica is a provider of teleradiology services with operations in the UK, Ireland and the USA. The company provides outsourced reporting of Magnetic Resonance Imaging (MRI), Computed Tomography (CT), ultrasound and X-ray images to customers including NHS trusts, the Irish Health Service Executive, private hospitals and insurance groups.
Founded in 2004, Medica has grown substantially to become a high-quality business with a reputation for reliable services and excellent teleradiology reporting, which has resulted in strong customer advocacy.
Investment rationale
- There are significant structural tailwinds in the teleradiology industry. Strong demand for teleradiology services has created a backlog, while the industry is suffering from a shortage of radiologists.
- Medica benefits from high barriers to entry as it is difficult for new entrants into the market to recreate Medica’s extensive network of radiology specialists and doctors. As a result, Medica has a “sticky” customer base.
- The business has an attractive financial profile with healthy margins and strong cash flow generation.
- The recent acquisitions in Ireland and the USA have expanded Medica’s geographic footprint and diversified its services.
Our relationship
Pantheon has a long-standing relationship with IK Investment Partners (“IK”) dating back to 2000, and holds six advisory board seats with the manager. PIP is currently invested in three IK funds on a primary basis. PIP is also a co-investor alongside IK in Salad Signature, a manufacturer of salad spreads.
Active management and value creation
IK has a track record of creating value in the healthcare sector having invested in 23 healthcare companies across Europe since inception, deploying a total of €2.1bn.
The manager views M&A as a key tool to continue Medica’s growth trajectory with further investment expected to increase the size and speed of its buy-and-build strategy. Organically, the manager sees value creation opportunities through the delivery of scale and deeper penetration of both new and existing telemedicine services, in new and existing geographies.
Additionally, the manager plans to leverage artificial intelligence to improve Medica’s workflow, minimise their customers’ backlog and ultimately enhance patients’ medical journey and outcome.
About the company
Commify is a provider of business messaging solutions to small and medium-sized businesses (SMEs). Its products allow companies to communicate with their customers via text and email for mission-critical uses such as appointment confirmations and customer support. Commify employs nearly 300 people across Europe, the USA and Australia.
Investment rationale
- Commify is one of the leading players in a market where growth is being driven by trends such as digitalisation, the increasing use of messaging services and privacy regulations which favour larger operators such as Commify.
- Commify, with its diverse product offering, is well-positioned to serve small and medium-sized businesses (SMEs). Commify’s value propositions ensure a high level of customer service and compliance tailored to customers’ needs.
- ECI Partners (“ECI”) has extensive experience and a track record of creating value within businesses operating in the digital platforms, SME services and Cloud and digital services sectors.
Our relationship
PIP is a primary investor in three ECI funds, and Pantheon currently holds three advisory board seats with the manager. PIP is also a co-investor alongside ECI in Ciphr, a provider of human capital management and payroll solutions to mid-market businesses.
Active management and value creation
Commify has a long track record of M&A over the past decade. The company has a strong M&A pipeline and sees this as an important route to expand the business across existing and new geographies. The business messaging market is highly fragmented with sellers motivated by regulatory complexity and the burdens of technological development.
Investment by Commify in a new cloud platform is expected to provide access to a broader range of customers, enable cross-selling opportunities and improve M&A integration. ECI will also seek to invest in product development to offer new products and services to customers.
- Founded in Paris in 1972, Chequers Capital (“Chequers”) is one of the longest established private equity managers in Europe.
- With over 50 years of experience, Chequers has raised and invested 18 funds since 1972, and has over €2bn under management.
- Chequers has 25 investment professionals across France, Italy and the DACH (Germany/Austria/Switzerland) region, supported by a large eco-system of operating experts.
- A small and mid-market buyout specialist, Chequers targets asset-light industrial and service businesses, often acquired from family owners, and focuses on creating value through driving growth and operational improvements.
- Over the past year, Chequers has succeeded in realising several portfolio companies, despite the general slowdown in the exit environment, resulting in sizeable distributions to PIP, including those from Serma, MTA and Riri.
Serma
- Provider of electronic testing services and solutions, for the aerospace, transportation, energy and telecommunications sectors, based in France.
- Exited to a financial buyer in July 2022:
Proceeds to PIP: £1.6m
IRR: 32%
Return generated: 2.4x
Uplift on exit: 50%
Value creation bridge
MTA
- Manufacturer of heating, ventilation and air conditioning equipment based in Italy.
- Exited to Trane Technologies, a US strategic buyer, in May 2023:
Proceeds to PIP: £1.0m
IRR: 40%
Return generated: 3.2x
Uplift on exit: 56%
Value creation bridge
Riri
- Manufacturer of coated metal accessories such as zips, buttons and buckles for the high-end luxury fashion industry, based in Switzerland.
- Exited to Oerlikon Group, a Swiss strategic buyer, in February 2023:
Proceeds to PIP: £2.1m
IRR: 34%
Return generated: 2.7x
Uplift on exit: 82%
Value creation bridge
About the company
Interactive Investor is the second largest direct-to-consumer online wealth management platform in the UK. It operates an investment and trading platform that provides retail investors with financial information, tools and a trading environment in which they can make investment decisions. This award-winning platform puts customers in control of their financial futures.
Investment rationale
The acquisition provided access to a high-growth direct investment market, a scalable business platform that could be expanded rapidly through acquisitions and a combined technological platform that meets clients’ financial needs at different stages of their lives. The business model has stable and high recurring revenues based on a flat-fee monthly subscription model. J. C. Flowers (“JCF”) acquired the company from a very motivated seller, with a plan to (i) consolidate existing customers across business units (a cross-selling opportunity) and (ii) implement a data/technology transformation (combined with improved pricing/brand management strategy).
Our relationship
Pantheon has been an investor in J. C. Flowers’ funds since 2016 via multiple secondary transactions.
Active management and value creation
- Under JCF’s ownership, interactive investor had a strong track record of acquiring and integrating complementary platforms. Interactive investor completed the acquisitions of TD Direct Investing in 2017, Alliance Trust Savings in 2019, and Share plc in 2020. The latest acquisition was the EQi book of customers, which completed in June 2021.
- In addition, the company was able to execute on their technology transformation initiative, making operations more efficient and driving a market leading user experience. Together, these all translated into high growth via the business’s scalable infrastructure and brand leadership, which JCF helped to cultivate.
- From June 2017 to May 2023, J.C. Flowers grew interactive investor’s assets under administration from approximately c. £21bn to £55bn through a suitable mix of organic growth and strategic M&A. This was the equivalent to an annualised growth rate of c.17% over the six year holding period.
Exit
Interactive Investor was acquired by abrdn plc, a UK-based asset manager, in May 2023.
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.