East of England
In good health
The East of England is perhaps most famous for the healthcare and pharmaceutical companies based in and around Cambridge. Therefore, it’s unsurprising that a number of the fastest-growing PE-backed companies here hail from those sectors, with Vita Health Group, Pharmanivia, Mountain Healthcare, Consensus Support Services and SPT Labtech all generating high levels of growth.
However, by far the most successful sector for private equity-backed companies in this region is business products and services. And this includes facilities management company Churchill Group, previously backed by Soho Square Capital.
Churchill’s founders, having set up the business in 1999, had impressively grown to £250m revenues and were looking for an investment partner in order to de-risk their own positions as well as make way for the new management team to start taking the reins.
The founders met Soho Square back in 2019 and after 12 months of discussions, the deal closed on the day Italy went into lockdown as the Covid pandemic made its way into Europe.
Stephen Edwards, managing partner of Soho Square, recalls: “We were very quickly into Covid but the team managed it extremely well. While it was complicated operationally, fundamentally the demand for cleaning services increased.”
While it [Covid] was complicated operationally, fundamentally the demand for cleaning services increased
Indeed, while Churchill’s clients were closing their offices to staff, they required additional deep cleaning services. “Churchill responded elegantly, providing cleaning and tech solutions, including smartcodes to validate areas sanitised to a Covid-19 safe standard,” explains Edwards.
Churchill’s security services, which at the time made up 15% of the business, also benefited from office closures. “With offices closed they needed good security, so demand also increased for these services,” says Edwards.
Beyond a swift and innovative response to the pandemic, Churchill’s growth has been driven by several other factors. As the UK came out of lockdown, the importance of cleaning remained a priority for offices, which led to robust revenue growth following the pandemic.
Churchill operates in a highly competitive space, against large companies including the likes of Serco – businesses offering a wide range of lines beyond cleaning and security, including decorating, lift maintenance, landscaping and so on. However, according to Edwards, Churchill’s focused offering has resulted in better profitability: “Churchill is one of the largest focused facilities management companies but with better margins than you typically see.”
“Trust is so important. A private equity deal is a very complicated thing to do, there are so many moving parts. So businesses need to build a bridge of trust between them and the private equity house”
Jamie Austin, Global Head of Private Equity, BDO
Soho Square exited Churchill in August 2023, having achieved the growth plan in just three years instead of the originally proposed five years.
As well as an accelerated hold period, Soho Square was also able to achieve an interesting and positive sale. “Given the way we structure deals, we didn't have a significant equity stake in Churchill when we came to exit. More broadly, that means the companies we back don’t necessarily have to be sold as a whole for us to realise our investment. It creates opportunities to do refinancings or for management to buy us out.”
And in the case of Churchill, given the company’s rapid growth, its founders explored a range of liquidity options. Ultimately, Soho Square exited via an Employee Ownership Trust. “This provided us an exit and interesting liquidity event for the founders, as well as moving ownership to employees,” says Edwards. “This was only possible because the business had performed so well and how the deal had been structured.”
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