Palatine invests in Forrest secondary buyout

UK-based Palatine Private Equity has backed the secondary management buyout of social housing contractor Forrest acquiring a significant minority stake. The deal is Palatine’s fourth investment from its second fund.

PRESS RELEASE

Palatine Private Equity has backed the secondary management buyout of social housing contractor Forrest, investing £16million for a significant minority stake.

The deal is Palatine’s fourth investment from its second Fund, which achieved a final close of £150million in June this year. The transaction sees private equity firm LDC achieve a partial exit, but leaves Palatine and LDC with a combined majority stake in the business.

Bolton-based Forrest is a leading provider of essential refurbishment and responsive maintenance services to the social housing market in the North of England. Over the last three years Forrest has established a renewables division becoming one of the first registered installers under the Government’s Green Deal and Energy Company Obligation (ECO) initiatives. The business also undertakes new build development and estate renewal services for its core social housing customer base.

The company works with major social housing clients including Bolton at Home, City West Housing Trust, Salix Homes and Blackpool Coastal Homes. While the company predominantly works in the North West it also has clients in Yorkshire, the North East and the South West of England.

Forrest, which now boasts an order book worth £1.2billion, has seen its turnover grow from £38million in 2007 to over £100million. Sales grew by almost 50 per cent in 2012, which also saw the business launch an environmental services division and open a regional service centre in Bolton.

The business employs around 500 people and also operates a responsive maintenance division from a site in Leeds.

Forrest is led by chief executive Lee McCarren and managing directorMark Lyons. Palatine managing partner Gary Tipper, partner Ed Fazakerley and investment manager James Winterbottom worked on the deal.

Tipper and Fazakerley will join the Forrest board as non-executive directors. Bob Holt, chairman of social housing company Mears Group plc, will become non-executive chairman. Current chairman Robert Morgan will leave the business.

Ed Fazakerley, Partner at Palatine Private Equity, said: “Forrest is one of the leading social housing contractors in the North West and has shown impressive growth, both in turnover and profit, under the management of Lee McCarren, Mark Lyons and the management team.

“Management has succeeded in broadening the business offering in order to capitalise on the significant new-build and renewables opportunities that are available in the social housing arena. We are looking forward to working closely with Lee and the management team to exploit these growth opportunities.”

Lee McCarren, Chief Executive Officer at Forrest, said: “LDC, led by Jonathan Bell, have been a hugely supportive partner for the business over the past six years. With Palatine alongside us as an additional investor, we can continue to drive improvements in the quality of our customer service offering, as well as developing more new and complementary service lines. This on-going strategy has been the key to our many consecutive years’ growth and to our strong, long-term customer relationships.

“On behalf of the business, I’d like to thank Robert for his invaluable counsel and for the time and energy which he has invested into Forrest since he became our chairman. He has played an influential role in the company’s recent successes.”

Jonathan Bell, Director and Co-Head of LDC in the North West, who will remain on the board at Forrest, said: “We have supported Forrest’s consistent growth in the social housing support services sector and its transition into the leading regeneration specialist in the North of England. We are committed to working with Palatine to continue to support the business as it further develops its environmental services offering and targets new framework opportunities.”

A team at Deloitte, led by partner Paul Trickett, advised LDC and management on the deal and a team at Deloitte in Manchester, led by partner Jodi Birkett, provided financial duediligence. David Crout at PMSI Consulting provided commercial due diligence. Dave Foreman, a partner at Praetura Capital provided banking and financial services.

RBS and Santander Structured Finance provided senior debt and working capital facilities of £26m. The RBS team was led by Tony Dean and James Adams and the Santander team comprised Chris Thomas and Paul Wickers.

Rebecca Grisewood of Gateley provided legal support to Palatine and Jonathan Robinson and Darren Ormsby of DWF acted on behalf of LDC and management. Richard Oman of Addleshaw Goddard advised the banks. Management due diligence was carried out by the Quinn Partnership with Marsh carrying out insurance due diligence.

ENDS

Press contact:
For Palatine Private Equity:
Liam Buckley @ MC2 (0161 236 1352 or 07841 843161)

Notes to editors

About Palatine Private Equity:
Palatine Private Equity (“Palatine”) was originally known as Zeus Private Equity before rebranding in January 2011. The firm was formed in 2005 by Gary Tipper, Ed Fazakerley and Tony Dickin and closed its maiden fund inDecember 2007 at £100m. Fund II was closed in June 2013 at £150m.

From offices in Manchester, London and Bristol, Palatine seeks to invest in established UK companies with enterprise values of up to £50m. The investment team looks at opportunities and provides funding for MBOs, buy and build strategies, acquisition finance, equity release and restructuring. Palatine has completed three exits from Fund I including generating a 4.5x return in March 2010 with the secondary buyout of telecommunications provider XLN Telecom and a 3x return on the secondary buyout of Air Energi which completed in October 2012. Palatine’s portfolio currently comprises:

Fund I
– Hallmark Hotels: a UK regional 4* hotel chain (Buy and build)
– MJ Quinn: an infrastructure services business providing electrical, mechanical and fire protection services to the London Underground and rail sector (Buyout)
– Electranet: a specialist networking services supplier, primarily to public sector organisations (Buyout)
– MoneyPlus Group: a provider of consumer financial services including Debt Management Plans, IVAs and otherfinancial solutions (Buy and build)
– Wealth at Work: a provider of financial education and employee wealth management services in the workplace (Buy and build)
– Selection Services: a provider of IT services, delivering a broad array of managed services, hosting and cloud solutions along with bespoke projects and strategic advice (Buy and build)

Fund II
– Chase Templeton: a the leading private medical insurance intermediary (Buy and Build)
– Playnation: the leading supplier of amusement and entertainment machines and supplies to holiday parks, motorway services, bowling centres and airports (Buyout)
– Icelolly: the low-cost price comparison website (Buyout)