- Nature of Business: Glass processing
- Year of Entry: 2005
- Amount Invested: £200,000
- Year of Exit: 2011
- Returns to Fund: £1,418,424
- Equity %: 40%
- Cash Multiple: 7.1
- Midven Added Value: Saving Company from Administration, Pricing Model, Capital Investment Program, Exit for Production Director
How Midven Helped:
Midven’s Advantage Growth Fund invested in MIG in June 2005, supporting the secondary management team in a buy-out from the retiring owner. The business was heavily loss making and we quickly recognised that the secondary management team was key to its future. We structured a deal which enabled the company to be bought for a £1, ensuring it did not enter administration and securing some 50 jobs and provided ‘working capital’.
Our analysis in due diligence identified that much of the work that the company was doing was loss making due to high material costs, which were consistently increasing. We encouraged management to increase prices by passing on changes to material and delivery costs, and focus on high levels of customer service (i.e. short turn around) to increase the perception of ‘added value’. This combined with an emphasis on product quality resulted in significant customer expansion and higher profitability. In the first year following the change of ownership the company achieved a profit of £119,000, and in the second year a profit of £482,000.
In 2008/9 the recession hit hard returning the business to break even. By offering the company the security of further potential funding (which was never required) we encouraged management to invest heavily in new plant and equipment (funded on hire purchase) which enabled the company to broaden its product range and improve product quality once more. This resulted in the company securing significantly more business as a number of its ‘under invested’ and out dated competitors failed, and profits exceeded £500,000 in 2011.
Midven exited, alongside the retiring production director, through a private equity backed secondary buy-out. The transaction was structured in a way that enabled the younger members of the management team, who were not exit ready, to crystalise some value whilst providing the capital to pursue an acquisition strategy.
At the time of exit MIG was one of the largest independent specialist glass processors in the UK, employing 56 people.