Wales
Peaks and valleys
At the top of our list of PE-backed companies in Wales is outdoor adventure company Zip World, which secured a significant minority investment from LDC in December 2018. Following a competitive process, LDC was selected as the company’s preferred partner thanks to its shared vision for growth and genuine excitement about its offering, according to Zip World CEO Andrew Hudson. “We are a very ambitious, entrepreneurial business and we felt that LDC was the right fit for our management team.”
A major facet of Zip World’s ambition was to grow the business in a sustainable and socially responsible manner. And that has really played out. Despite the disruption caused by Covid, which had major implications for businesses operating in the hospitality and leisure industry, during the last five years Zip World has more than doubled the number of sites it operates and the people it employs, and is on track to attract a total of two million visitors by the end of 2025.
The Welsh government is really supportive of local tourism businesses because it's important for employment
The business recently received a funding commitment from the Welsh government. Says Hudson: “The Welsh government is really supportive of local tourism businesses because it's important for employment. We secured allocated matched funding as part of the North Wales Growth Deal for the Responsible Adventure project; our proposal was focused on being a more sustainable and responsible business. It included an e-bus network designed to tackle the traffic caused by tourism but would also be an experience too, so people can leave their cars behind and use the buses instead. It is also about taking the pressure off some of those honeypot tourism areas in Wales.”
Indeed, Zip World’s growth has resulted in not only providing innovative experiences to its customers but also reducing the seasonality of its offering, with planned new additions such as its cable car and slate explorer experience. “That is changing the job opportunities we offer in local communities and has a downstream impact on other local businesses. We’re focused on what we can provide to the places in which we operate, such as reducing traffic and being responsible,” says Hudson.
While Zip World may appear to simply be an adventure experience provider, look a little deeper and it is doing so much more. “Our growth is focused on evolving our existing sites as well as developing more. What we’ve learnt from operating in Wales, which will always be our heartland, is the importance of the local language, culture and heritage. As we add more sites, we add those community stories to what we do,” says Hudson. “We are a specialist in post-industrial communities, which have sometimes suffered in more recent times. We are taking our learnings from North Wales to new locations. Not only are we very light touch when it comes to our environmental impact, we’re focused on supporting rural communities in areas that might otherwise be at risk.”
Zip World’s next stage of growth will come from its soon to be launched new site in Conwy, North Wales. “It will be a completely indoor site, so perfect for any weather. And it will tap into the staycation market, offering 33 camping lodges,” says Hudson.
The lower number of top-performing high-growth private equity-backed companies in Wales reflects the reduced investment activity in the country relative to other regions in the UK. However, for James MacLeay, investment director at WestBridge, the market is ripe for growth investing: “Traditionally there have been more growth investment opportunities in Wales, a reason why the Development Bank of Wales has been so successful doing earlier-stage deals. We are uniquely positioned to be the only independent buyout firm to have a presence in Wales,” he explains.
WestBridge employs a highly selective approach to deal-doing. “We’ve looked at 15 deals in Wales over the last four years,” says MacLeay. “Some went to strategic trade acquirers, some were too large for us and some never transacted. While we haven’t done a deal in Wales over the last few years, we’re very selective and typically only do one to three deals per year across the UK. We’re highly engaged in the market and we are well placed when something does come up.”
That selectivity is underpinned by several factors, most important of which is developing strong partnerships with management teams. “We’re about supporting management teams and their ambitious plans, which often leads to job creation. Supporting Welsh entrepreneurs is key,” states MacLeay. “It’s about that partnership model and working closely with management teams. We are very selective so that we can be engaged and involved when we invest and bring that support.”
Although Wales doesn’t always have the highest volume of deals, as a selective investor we’re absolutely focused on finding the gems
One of WestBridge’s investments, featured on the list, is a great example of this. In 2014, WestBridge acquired Vista from previous backer Finance Wales. Cardiff-based Vista provides time-sensitive IT support and maintenance services to the retail, hospitality and leisure sectors. “We really liked the business. It had strong recurring revenues, a strong cash-generative profile and a really solid management team,” recalls MacLeay.
Through that strong partnership with the company’s management team, during the investment period, WestBridge supported Vista in diversifying its customer base to broader sectors. “It was focused on consumer retail and we broadened to leisure, transport ticketing, petrol forecourts and convenience stores,” explains MacLeay.
Headcount also grew, with the addition of more engineers and repair-centre roles specifically. “To grow revenues we needed to also grow headcount and create more jobs,” says MacLeay.
WestBridge also supported Vista’s technological improvements: “Especially the technology used for installations and servicing, which led to reduced costs and increased profitability,” adds MacLeay. Indeed, during the investment period, Vista’s profits doubled, which led to an impressive 4x return for WestBridge when the company was sold to LDC in 2017.
“For entrepreneurs, private equity not only provides expertise – someone who has done this multiple times – but also someone to walk alongside you, to pull you up, to give you ideas and to support you.
Derek Neil, Partner, Head of Transaction Services, Deal Advisory, BDO
Despite having done fewer deals in Wales in recent years, MacLeay is positive about the country: “For Wales, perhaps more so than other regions, it’s dominated by entrepreneurs and founder-led businesses. I think there will be opportunities arising where a founder has taken a business through Covid, got it on track, and is now able to think about the next stage of growth. Or they have built a management team and they want some kind of exit, so they’re looking for an involved investor to support that journey. We are confident about the opportunities coming through. And although Wales doesn’t always have the highest volume of deals, as a selective investor we’re absolutely focused on finding the gems and there are some really interesting businesses here.”
Click here to find a private equity expert in your region.
