LDC has announced the completion of a £19.5million debt financing for Microlease, an international leader in test and measurement equipment rental and asset management services, which will use part of its newly-expanded credit facilities to acquire the European operations of major US rival Telogy Inc.
Microlease’s original debt provider, the asset finance provider Lombard Business Finance, has increased its facility from £7.8million to £12.5million, while Lombard’s parent, The Royal Bank of Scotland (RBS), has provided a further £7million. This follows LDC’s investment of an additional £8.3million in Microlease in August 2009. LDC backed the original £30million MBO of Microlease led by CEO Nigel Brown in 2006.
The additional debt and equity funding is designed to finance strong organic growth combined with acquisitions over the next 12-24 months to take advantage of opportunities arising as markets recover from recession.
LDC has worked closely with senior management since the MBO to develop a strategic plan, which combines organic growth with an acquisition strategy targeting complementary businesses, and is always proactively looking to provide additional capital to its investee companies to help spur changes in growth at a time when competitors may be cash constrained.
The first deal to be announced as a result of this strategy and the newly-increased facilities is Microlease’s acquisition of Belgium-headquartered Telogy International NV, the European operations of Telogy Inc, one of the US leaders in test equipment rental.
The acquisition is complementary and will help to broaden significantly Microlease’s offer, as Telogy focuses more on the defence and aerospace sectors, while Microlease has traditionally been stronger in the telecoms area. It will also provide the company with a greater range of instrument and assets, which will be of great benefit to customers.
Microlease has enjoyed strong organic growth since the MBO three years ago with a compound annual growth rate of some 35%. The deal will further boost Microlease’s annual turnover by about £5million to close to £30million.
Microlease is based in the UK and operates across Europe, Africa and the Middle East as well as in the Americas. Microlease offers a broad range of services to the Test & Measurement market, including rental, leasing and sale of Test Equipment as well as calibration and asset management services. During the downturn Microlease has benefited as companies have looked to reduce capital expenditure by increasing their leasing/rental requirements, while
demand for Asset Management services too has been strong as customers have looked to improve the utilisation on their assets.
LDC has done more than 10 deals this year and plans to invest over £250m in 2009.
Nigel Brown, Microlease Managing Director, said: “The enhanced debt and equity funding, which LDC has organised, gives us the firepower to deliver on the exciting strategic plan that we have developed together to accelerate the growth of the business and enhance the offer to our customers. LDC’s desire to expand our business matches our own ambition and they are a vital partner as we look to capitalise on the opportunities thrown up as economies and markets recover.”
Yann Souillard, Director at LDC said: “The acquisition of Telogy International underscores our desire to grow Microlease through a combination of organic growth and a buy and build strategy. This transaction is consistent with LDC's desire to commit additional capital to investee companies to help create a step change in their strategic positioning over the downturn. Nigel Brown and his team at Microlease have done a fantastic job since the MBO in 2006 and the acquisition of Telogy International reaffirms our confidence in the team's ability to continue to
create value.”
Tom Cawley, Managing Director, Financial Sponsors Leverage at RBS added: “The ability of Microlease to continue to grow and diversify their business in the current economic environment is testimony to management's ability to read and understand key market drivers and to the strong delivery systems that they deploy. The RBS facility suite has been specifically designed to complement their Lombard Asset Finance funding in order to provide maximum flexibility, allowing Microlease to capitalise on current and future opportunities within the context of a stable funding structure.”
NOTES TO EDITORS
LDC (Lloyds TSB Development Capital) is part of the Lloyds Banking Group and is authorised and regulated by the Financial Services Authority. LDC has, since 1981, completed over 400 investments, has ongoing interests in over 60 businesses across the UK. LDC back ambitious management teams from UK-based companies seeking between £2m and £100m of equity for management buy-outs, institutional buy-outs or development capital transactions. LDC invests in a broad range of sectors and has particular experience in financial services, healthcare, industrials, IT & software, leisure & media, retail & consumer